Natural Money is an interest-free demurrage currency. It features a holding fee on currency and a maximum interest rate of zero on money and loans. The Natural Money currency is an accounting unit only, as the holding fee, which may range from 0.5% to 1% per month, makes the currency unattractive to hold. Therefore, the currency will not circulate, nor will someone invest in it. Cash, bank deposits, bonds, stocks, real estate, and other investments aren’t currency and therefore not subject to the holding fee. Not paying the holding fee and the curtailment of credit, and thereby inflation, caused by the maximum interest rate, can make lending at negative interest rates attractive.
Natural Money features a separation between regular banking, also known as commercial banking, which involves lending and borrowing, and investment banking, also referred to as participation banking, which involves participating in businesses. Regular banks guarantee returns to their depositors and use their capital to cover losses. Participating banks have shareholders who share in the profits and the losses. These two bank types should remain separated, even though one bank might offer both in distinct accounts. A commercial bank’s funds should be used only for lending. The maximum interest rate limits lending, allowing equity to replace debt in the financial system.
Evidence from history
There is little historical data on the subject of interest-free demurrage currency. Financial systems founded on interest-free money with a holding fee have never existed. There were holding fees and interest bans, but the combination of both has never existed. More importantly, a usury-free financial system requires a high-trust society founded on moral values where investments are safe, and is only feasible with the help of several relatively modern financial innovations. That all seems too good to be true, but we can have dreams. And so, the evidence from history is of limited value.
Several ancient societies have seen usury-induced economic crises. Extreme wealth inequality, often accelerated by usurious lending, regularly coincided with societal collapses. It is a recurring pattern that has existed since time immemorial. The Sumerians were already familiar with charging interest and its disastrous social consequences. Sumerian rulers began implementing debt jubilees as early as 2,400 BC, cancelling debts and freeing debt slaves. Other cultures, such as those in Israel, have banned charging interest. Israel also had debt jubilees every fifty years.
The Egyptian grain-backed currency existed for over 1,000 years, suggesting it provided monetary stability. Nevertheless, ancient Egypt has seen economic crises, often due to droughts causing crop failures, high taxation during warfare, or a weakening central government. The government mitigated famines with its grain reserves, but prolonged famines depleted these facilities, leading to civil unrest and, sometimes, a collapse of order. There is no evidence of social benefits of this money for Egyptian society. Charging interest was common, and Egypt had debt cancellations.
In the Middle Ages, the Church forbade charging interest. Christians, like Jews, were each other’s brothers and couldn’t charge each other interest. When economic life became more developed, the ban on interest became difficult to enforce. In the 14th century, partnerships emerged where creditors received a share of the profits from a business venture. As long as the share remained profit-dependent, it was not illegal, as it was a participation in a business rather than lending at interest.1 Islamic finance works with similar principles.2
In the 17th and 18th centuries, interest ceilings replaced bans. To circumvent the interest ceilings, a creditor and debtor could secretly agree on a fraud, whereby the creditor handed over less money than stated in the loan contract, so that the borrower actually paid more interest.3 More recent experiences with Regulation Q in the United States, which imposed maximum interest rates on bank accounts, suggest that a maximum interest rate is enforceable only if it does not significantly impact the bulk of borrowing and lending.4
An effective ban on usury requires a society grounded in moral values rather than profit. It requires us to live modestly and within the planet’s limits. It also requires societies to care for vulnerable individuals, so that they don’t fall prey to usurers. You shouldn’t charge interest, not merely because it is illegal, but because it contributes to something profoundly evil. That points to a broader problem. We should care about the world and consider the consequences of our actions. Even when what we do is legal, it doesn’t mean that it is good.
Implementation
To implement Natural Money, interest rates must already be low or negative. Attempting to lower interest rates when market conditions don’t justify that move would likely scare investors. Low interest rates require trust, which requires financial discipline, including fiscal discipline from governments. That doesn’t equal austerity, since governments earn interest on their debts when interest rates are negative. The transition preferably is a gradual process that the authorities communicate in advance. Whether that is possible at all remains to be seen, as the implementation may occur in exceptional times.
If there is still a functional currency, the first step is for the government to balance the budget. The second step is to decouple cash currency from the administrative or central bank currency. The move encompasses retiring central bank-issued banknotes and replacing them with treasury-issued banknotes. Not everyone will hurry to a local bank office to exchange banknotes, so the central bank-issued banknotes must be exchangeable at par for the new banknotes for a considerable period.
As long as interest rates are significantly above zero, a holding fee won’t bring them down. Setting a maximum interest rate can lower interest rates by curtailing credit, thereby cooling the economy. To avoid disrupting financial markets, the implementation must be gradual. The maximum interest rate should be high enough to avoid disrupting the economy. Initially, authorities could set the holding fee at a low percentage, or not at all. As interest rates fall, authorities can lower them.
The zero lower bound is a minimum interest rate. It operates like a price control by preventing interest rates from moving freely to the rate where supply and demand for money and capital balance. That is to the advantage of the wealthy, as they can take the economy hostage by demanding a minimum return on their investments. When returns are low, investors may prefer cash over investments, which can hinder an economic recovery. Economists call it liquidity preference.
Low interest rates can prompt lenders to seek higher yields and take on more risk. Low interest rates allow borrowers to take on more debt. Low interest rates can promote investments that become unprofitable when the economy slows down. A maximum interest rate can prevent these situations from happening. A maximum interest rate caps the risk lenders are willing to take and promotes a deleveraging of balance sheets, so that even low-yielding ventures don’t go bankrupt because of interest-bearing debts.
Issues with the maximum interest rate
A holding fee will cause few difficulties, but a maximum interest rate is more problematic. Insofar as the maximum interest rate affects questionable segments of credit, such as credit card debt and subprime lending, this is beneficial overall. More serious issues can emerge with financing small and medium-sized businesses. Partnership schemes can fill in the gap, but it is hard to predict how that will play out. The maximum yield on loans is zero, making partnerships more attractive, as they can offer higher returns.
There may be objections to the limits Natural Money imposes on consumer credit. Still, there is little doubt that a maximum interest rate can improve consumers’ purchasing power, as borrowers won’t have to pay interest. As a result, there are fewer borrowing options, which may lead to the emergence of black markets. To make illegal schemes unattractive for lenders, lenders who charge interest could lose the money they have lent.
Zero is the only non-arbitrary number, making it more difficult to change the maximum interest rate. That may happen for political or other reasons. The salespeople of usury can find plenty. If it is one, why not two? Zero is a clear line. A positive interest rate, no matter how small, contributes to financial instability. All positive growth rates compound to infinity, so once we start the fire of usury, it will eventually consume us.
A maximum interest rate seems feasible if it is above the rate at which most borrowing and lending occur, thereby limiting the effects on liquidity in the fixed-income market. A maximum interest rate creates room for alternatives, such as private equity and partnership schemes. These alternatives can supplement the fixed-income market and mitigate the effects of the maximum interest rate. A maximum interest rate is beneficial overall if it mainly affects questionable segments of credit, such as subprime lending.
In the case of bonds, the maximum interest rate of zero applies at the time of issuance. Due to economic circumstances or issues with the debtor, the interest rate may rise and enter positive territory. Likewise, governments may issue long-term bonds that may have positive yields if interest rates rise later on. That is not a serious issue, as long as the interest rate was zero or lower at the time of issuance.
A more serious issue is the risk of liquidity problems. When interest rates rise, less credit becomes available at interest rates of zero or lower. Interest rates might increase due to a strong economy with inflationary pressures. There are always economic agents that must borrow at all costs to meet their present obligations, so if they can’t borrow, they might go bankrupt. Businesses and individuals need to deleverage and arrange credit in advance, such as an overdraft facility, with their banks.
Another equally serious question is the profitability of banks with Natural Money. The lending business of banks will likely shrink significantly. The assumption is that risk-free lending will be profitable. But what if it isn’t? In that case, banks may need to lower the interest rates on deposit accounts to a level below the interest rate on short-term government debt. In that case, the cash interest rate may need to be lower than the interest rate on short-term government debt to make it work.
Inherent stability
Ending usury is impossible without investors having trust in the political economy or the political and economic institutions of the polity issuing the currency. The most trusted political economies have the lowest interest rates because their governments are fiscally responsible. Natural Money requires taking it to the next level. With Natural Money, to borrow, the government must find lenders willing to lend in the currency at negative interest rates. The government will be better off borrowing at negative interest rates, which provides an incentive for budgetary discipline. That is the foundation of stability.
Extracting a fixed income from a variable income stream contributes to financial instability. Fixed interest payments can bankrupt a corporation even when it is profitable overall. Interest contributes to moral hazard, as it serves as a reward for taking risks. Investors expect to earn higher yields on riskier debt, so lenders take on these risks. The more uncertain an income source, the higher the interest rate needs to be to compensate for the risk of lending, but the higher the fixed interest rate, the more likely failure becomes, which reveals the destructive consequence of interest being a reward for taking risks.
All parts of the financial system are intertwined. Individual banks can transfer these risks to the system. And so, the risk management of individual agents can increase the overall level of risk in the system. The payment and lending system is a key public interest, so governments and central banks back it. Banks take risks and reap rewards in the form of interest, while public guarantees back up the financial system. The arrangement leads to moral hazard, a mispricing of risk and private profits at the expense of the public. A maximum interest rate can end these problems.
A maximum interest rate causes a deleveraging and a reduction in problematic debts, which has a stabilising effect on the financial system and the economy. Individuals and businesses must already take action before their debts become problematic. Maximum interest rates can distort financial markets. Most notably, there will be fewer options for smaller firms to borrow. Partnership schemes should fill that void.
Interest payments also affect business cycles. The mainstream view is that central banks should raise interest rates during economic booms to curb investment and spending, thereby preventing the economy from overheating. A rosy view of the future prevails during a boom, so higher interest rates seem justified and borrowing continues for some time. When the bust sets in, the picture alters, and an overhang of debt at high interest rates worsens the woes. It would have been better if these debts hadn’t existed in the first place.
That makes a usury-based financial system inherently unstable. Natural Money changes this dynamic. When the economy improves, higher interest rates increase the attractiveness of equity investments relative to debt. That reduces the funds available for lending. The curtailment of credit will prevent the economy from overheating and avoid a debt overhang. When the economy slows, negative interest rates provide stimulus. In the absence of a debt overhang, the economy is likely to recover soon. A Natural Money financial system is inherently stable.
Featured image: 1919 Cover of The Natural Economic Order. Wikimedia Commons.
1. Simon Smith Kuznets, Stephanie Lo, Eric Glen Weyl (2009). The Doctrine of Usury in the Middle Ages. Simon Smith Kuznets, transcribed by Stephanie Lo. An appendix to Simon Kuznets: Cautious Empiricist of the Eastern European Jewish Diaspora. 2. Sekreter, Ahmet (2011). Sharing of Risks in Islamic Finance. IBSU Scientific Journal, 5(2): 13-20. 3. K. Samuelsson (1955). International Payments and Credit Movements by the Swedish Merchant Houses, 1730-1815. Scandinavian Economic History Review. 4. R. Alton Gilbert (1986). Requiem for Regulation Q: What It Did and Why It Passed Away. Federal Reserve Bank of St. Louis.
The last 200 years have been an era of exceptional economic growth, unlike anything the world has ever seen. Like any exponential phenomenon in a limited room, that growth will end. The best comparison is cancer. If it goes untreated, the host dies. The end of growth, whether it is by death of the host or treatment, has implications for capital, which is addicted to positive returns made possible by squandering planetary reserves. For most of history, there was a shortage of capital. But for the first time, there is a massive excess invested in the bullshit economy, transforming energy and resources into waste and pollution to make money for investors by producing and marketing non-essential products and services in a competition that is about to make humans redundant.
For most of history, economic growth has been negligible. However, it averaged 1.5% over the last two centuries and will soon return to zero, or possibly even lower, perhaps much lower. That has implications for returns on investments, the financial system and interest rates. Investors have become hooked on positive returns, so there must be growth. Otherwise, they lose confidence. It is grow or die, but growth will kill us. And so, we face the prospect of an economic collapse and a collapse of civilisation. We are near a technological-ecological apocalypse. There is a dark force operating behind the scenes that makes us commit suicide. It is usury, or the charging of interest on debts. It makes capital addicted to growth.
The survivors may debate the precise cause of the collapse. I have already received a newsletter email from a pundit claiming that a lack of very cheap oil is leading to debt problems. Future generations may blame the planet for being finite, rather than seeing that human beings were so foolish as to build their civilisation on usury, so that it can only survive through economic growth. Before modern times, humans managed to live without economic growth, as there was hardly any capital and no interest-bearing debt. Past civilisations facing usury-induced economic collapses either disappeared, banned interest, or instituted debt cancellations.
The past 200 years have indeed been exceptional, and that miracle was primarily due to low interest rates. Efficient financial markets promoted growth by depressing interest rates, allowing economic growth to finance the interest. That has blinded us from the financial apocalypse that is upon us. Low interest rates have already brought us unprecedented wealth, albeit at the expense of the planet and future generations. When economic growth returns to sustainable levels, the interest on outstanding debt can collapse the world economy and bring down human civilisation. Luckily, a usury-free financial system for a future without growth already exists: Natural Money.
The nature of usury
Suppose Jesus’ mother had opened a retirement account for Jesus just after his birth in 1 AD at the Bank of the Money Changers next to the Temple in Jerusalem. Suppose she had put a small gold coin weighing three grammes in Jesus’ retirement account at 4% interest. Jesus never retired, but he promised to return. Suppose now that the bank held the money for this eventuality. How much gold would there be in the account in the year 2020? It would be an amount of gold weighing twelve million times the mass of the Earth. There isn’t enough gold to pay out Jesus if he returns.
And so the usurers hope he doesn’t come back, also for other reasons, of course. And for every lending, there is borrowing. The bank is merely an intermediary. There must be people in debt for an amount of gold weighing twelve million times the mass of the Earth. That would never happen. The scheme would have collapsed long before that, and the debtors would have become the serfs of the money lenders. That is why religions like Christianity and Islam forbade charging interest on money or debts.
The usurers have found a way around the issue. Our money isn’t gold anymore. Banks create money from thin air, so the nature of usury has changed. When you go to a bank and take out a loan, such as a car loan, you get a deposit and a debt, which the bank creates on the spot through two bookkeeping entries. You keep the debt, but the deposit becomes someone else’s money once you purchase the car. When you repay the loan, the deposit and the debt vanish into thin air. You must repay the loan with interest. If the interest rate is 5% and you have borrowed €100 for a year, you must return €105.
Nearly all the money we use is created from loans that borrowers must repay with interest. If our borrowing creates money, and we repay our debts with interest, then we may do so by borrowing the interest. That is also what happens in reality, and that is why debt levels continue to rise. So, where does the extra €5 come from? Here are the options:
Borrowers borrow more.
Depositors spend some of their balance.
Borrowers fail to repay their loans.
The government borrows more.
The central bank prints the money.
Problems arise when borrowers don’t borrow more, and depositors don’t spend their money. In that case, borrowers as a group are short of funds, and some of them are unable to repay their loans. If too many borrowers can’t pay at once, a financial crisis occurs. To prevent that from happening, the government borrows more, and the central bank prints money. They bring that money into the economy, allowing debtors to pay off their debts with interest. Interest compounds to infinity, and there is no limit to human imagination, so frivolous accounting schemes can go a long way before they collapse.
Necessity of interest
We take interest for granted, and economists believe that the economy needs it. Without lending and borrowing, a modern capitalist economy would have been impossible; without interest, loans would also be impossible. Money is to the economy what blood is to the body. If lending and borrowing halt, money stops flowing, and the economy comes to a standstill. That is like a cardiac arrest, which, if untreated, is fatal. And that is also why the financial press reads the lips of central bankers as if our lives depended on it. They manage the flow. Lenders have reasons to demand interest. These are:
When you lend out money, you can’t use it yourself. That is inconvenient. And so, you expect compensation for the use of your money.
The borrower may not repay the loan, so you desire compensation for that risk.
You can invest your money and earn a return. To lenders, the interest rate must be attractive relative to other investments.
That has been the case for a long time, and economists have gradually become quite good at explaining the past. Since then, we have seen financial innovations and are now facing the end of growth. Changes in the economy and the economic system may lead to the end of interest on money and debts. These are:
You can use the money in a bank account at any time. You can use the money you have lent as if it were cash. And a debit card is more convenient than cash.
Banks spread their risks, central banks help out banks when needed, and governments guarantee bank deposits, so bank deposits are as safe as cash.
There is a global savings glut. There are ample savings and limited investment options, which can make lending at negative interest rates attractive.
Negative interest rates are possible. In the late 2010s and early 2020s, the proof came when most of Europe entered negative interest-rate territory. The ECB was unable to set interest rates below -0.5%. Had it set interest rates even lower, account holders would have emptied their bank accounts and stuffed their mattresses with banknotes to avoid paying interest on their deposits, disrupting the circular flows.
As interest rates couldn’t go lower, the ECB took extraordinary measures, flooding the banking system with new money to boost the economy. Had there been a holding fee on cash, interest rates could have gone lower, and there would have been no need to print money. It has happened before. The Austrian town of Wörgl charged a holding fee on banknotes during the Great Depression, which led to an economic miracle by making existing banknotes circulate better rather than printing new money. Ancient Egypt had a similar payment system for over a thousand years during the time of the Pharaohs.
Miracle of Wörgl
In the midst of the Great Depression, the Austrian town of Wörgl was in dire straits and prepared to try anything. Of its population of 4,500, 1,500 people were jobless, and 200 families were penniless. Mayor Michael Unterguggenberger had a list of projects he wanted to accomplish, but there wasn’t enough money to fund them all. These projects included paving roads, installing street lights, extending water distribution throughout the town, and planting trees along the streets.1
Rather than spending the remaining 32,000 Austrian Schilling in the town’s coffers to start these projects, he deposited them in a local savings bank as a guarantee to back the issue of a currency known as stamp scrip. A crucial feature of this money was the holding fee. The Wörgl money required a monthly stamp on the circulating notes to keep them valid, amounting to 1% of the note’s value. The Argentine businessman Silvio Gesell first proposed this idea in his book The Natural Economic Order.2
Nobody wanted to pay for the monthly stamps, so everyone spent the notes they received. The 32,000 schilling deposit allowed anyone to exchange scrip for 98 per cent of its value in schillings. Few did this because the scrip was worth one Austrian schilling after buying a new stamp. But the townspeople didn’t keep more scrip than they needed. Only 5,000 schillings circulated. The stamp fees paid for a soup kitchen that fed 220 families.1
The municipality carried out the works, including the construction of houses, a reservoir, a ski jump, and a bridge. The key to this success was the circulation of scrip money within the local economy. It circulated fourteen times as often as the schilling. It increased trade and employment. Unemployment in Wörgl decreased while it rose in the rest of Austria. Six neighbouring villages successfully copied the idea. The French Prime Minister, Édouard Daladier, visited the town to witness the ‘miracle of Wörgl’ himself.1
In January 1933, the neighbouring city of Kitzbühel copied the idea. In June 1933, Mayor Unterguggenberger addressed a meeting with representatives from 170 Austrian towns and villages. Two hundred Austrian townships were interested in introducing scrip money. At this point, the central bank decided to ban scrip money.1 The depression returned, and in 1938, the Austrians turned to Hitler, as they voted to join Germany.
Since then, several local scrip monies have circulated, but none has been as successful as the one in Wörgl. In Wörgl, the payment of taxes in arrears generated additional revenue for the town council, which it then spent on public projects. Once the townspeople had paid their taxes, they would have run out of spending options and might have exchanged their scrip for schillings to avoid paying for the stamps. That never happened because the central bank halted the project.
The economy of Wörgl did well because the holding fee kept the existing money circulating. A negative interest rate encourages people to spend their money, eliminating the need to borrow and keeping the money circulating in the economy. It demonstrated that the economy required a negative interest rate. A holding fee makes negative interest rates possible, as lenders do not have to pay it after lending the money. The one who holds the money pays the charge. That can make lending money at an interest rate of -2% to a reliable borrower more attractive than paying 12% for the stamps.
Joseph in Egypt
In the time of the Pharaohs, the Egyptian state operated granaries for over 1,500 years. Wheat and barley were the primary food sources in Egypt. Whenever farmers brought their harvest to one of the granaries, state officials issued them receipts stating the amount of grain they had brought in. Egyptians held accounts at the granaries. They transferred grain to others as payment or withdrew grain after paying the storage cost.
The Egyptians thus used grain stored in their granaries for making payments. Everyone needed to eat, so grain stored in the granaries had value.1 Due to storage costs, the money gradually lost its value. With this kind of money, you might have interest-free loans. If you save grain money, you pay for storage. And so, lending the money interest-free to a trustworthy borrower can be attractive. There is no evidence that this happened.
The origin of these granaries remains unclear. Probably, the state collected a portion of the harvests as taxes and stored them in its facilities. The government storage proved convenient for farmers, as it relieved them of the work of storing and selling their produce. And it made sense to have a public grain reserve in case of harvest failures.
The Bible features a tale that supposedly explains the origin of these granaries. As the story goes, a Pharaoh once had a few dreams that his advisers couldn’t explain. He dreamed about seven lean cows eating seven fat cows and seven thin, blasted ears of grain devouring seven full ears of grain. A Jewish fellow named Joseph explained those dreams to the Pharaoh. He told the Pharaoh that seven years of good harvests would follow, followed by seven years of crop failures. Joseph advised the Egyptians to store food for meagre times. They followed his advice and built storehouses for grain. In this way, Egypt managed to survive seven years of scarcity.
The money gradually lost value to cover the storage cost of the grain. It works like buying stamps to keep the money valid, like in Wörgl. Both are holding fees. The grain money circulated for over 1,500 years until the Romans conquered Egypt around 40 BC. It did not end in a debt crisis, which suggests that a holding fee on money or negative interest rates can create a stable financial system that lasts forever.
Storing food makes sense today, even when it costs money. Harvests may become more unpredictable due to global warming and intensive farming. We only have enough food in storage to feed humanity for a few months as it is unprofitable to store more. Food storage ties up capital, so there is also interest cost. But you can’t eat money, so storing food to deal with harvest failures is as sensible now as it was in the time of the Pharaohs. It reveals the stupidity of our current thinking. Our survival needs to be financially viable. Just imagine how that will play out once artificial intelligence and robots can replace us.
Natural Money
The miracle of Wörgl suggests that a currency with a holding fee could have ended the Great Depression. A myth circulating in the interest-free currency movement is that had the Austrian central bank not banned the experiment, the Great Depression would have ended, Hitler wouldn’t have come to power, and World War II wouldn’t have happened. That is a tad imaginative, to say the least, but a holding fee could have allowed for negative interest rates, and they could have prevented the Great Depression from starting in the first place. That is a lot of maybes.
And such money can last. The grain money in ancient Egypt provided a stable financial system for over 1,000 years. The grain backing provided financial discipline. The holding fee prevented money hoarding that could have impeded the flow of money. The money, however, didn’t promote interest-free lending, so the Egyptian state regulated lending at interest to prevent debt slavery. Egyptian wisdom literature condemned greed and exploitative lending, encouraging empathy for vulnerable individuals.
A holding fee of 10-12% per year punishes cash users. If the interest rate on bank accounts is -2%, an interest rate of -3% on cash is sufficient to prevent people from withdrawing their money from the bank. That becomes possible once cash is a separate currency backed by the government, on which the interest rate on short-term government debt applies. Banknotes and coins thus become separate from the administrative currency. So, if the interest rate on the cash currency is -3%, one cash euro will be worth 0.97 administrative euros after one year. And now, we have a definition of Natural Money:
Cash is a separate currency backed by short-term government debt and has the negative interest rate of short-term government debt.
Natural Money administrative currencies carry a holding fee of 10-12% per year, allowing for negative interest rates.
Loans, including bank loans, have negative interest rates. Zero is the maximum interest rate on debts.
Consequences
Natural Money doesn’t fundamentally alter the nature of bank lending. Banks borrow from depositors at a lower rate to lend it at a higher rate. With Natural Money, banks may offer deposit interest rates of -2% to lend it at 0% instead of borrowing it at 2% to lend it at 4%. A maximum interest rate of zero, however, has a profound impact on lending volume, as it severely constrains it, most notably speculative lending and usurious consumer credit, and it favours equity financing over borrowing in business. The strict lending requirements affect business loans, leading to deleveraging.
Businesses still need to attract capital. To address the issue, Natural Money features a distinction between regular banks and investment banks. Regular banks can guarantee promised returns and have government backing because the payment system is a public service. Investment banks invest in businesses and take risks. They are comparable to Islamic banks. Investment banks don’t guarantee returns. Depositors take on risk to get better returns, but they might incur losses or temporarily have no access to their deposits.
While the maximum interest rate restricts lending, the holding fee provides a stimulus, thereby stabilising the financial system. When the economy slows down, interest rates decrease, and more money becomes available for lending as risk appetite increases, making lending at zero interest more attractive. Conversely, if the economy booms, interest rates increase, and the maximum interest rate curtails lending. Consequently, central banks don’t need to set interest rates and manage the money supply, and governments don’t need to manage aggregate demand with their spending.
Reasons to do research
Stamp scrip and other kinds of emergency money have helped communities in times of economic crisis. The economic miracle of Wörgl during the Great Depression of the 1930s, however, was exceptional. The payment of local taxes inflated the impact of the money. Many townspeople had been late on their taxes, but once the economy recovered, they had the money to pay them. Some even paid their taxes in advance to avoid paying the holding fee. It generated additional revenues for the town, which it could spend on the projects. It provided a boost that would have petered out once the villagers had paid their taxes.3 It was not a miracle. It was too good to be true. Still, there is more to it.
Once interest rates reach zero, the markets for money and capital cease to function as interest rates can’t go lower. Money is to an economy what blood is to a body, so it must flow. When the money stops flowing, the effect is like a cardiac arrest, and the economy is in dead waters. To keep the money circulating, those with a surplus must lend it to those with a deficit, and the interest rate should be where the supply and demand for money are equal. When that interest rate reaches zero, lenders stop lending because the return is not worth the risk, so they wait for interest rates to rise. Money then ends up on the sidelines, leading to cardiac arrest, which can be the start of an economic depression.
It happened during the Great Depression. If interest rates had been lower, the markets for money and capital could have remained in operation. We have seen negative interest rates in Europe for nearly a decade. They could have gone lower had there been a holding fee on cash, or even better, a negative interest rate that is just low enough to prevent people from hoarding it. Once interest rates can go lower, a usury-free global financial system may be possible. That gives rise to several questions. Is it possible? Under which circumstances? What are the benefits and the drawbacks? What are the implications for individuals, businesses and governments? And how does it affect the financial system?
There is no alternative
Several other monetary reform proposals do not view the financial system as a system, which it is, and that isn’t hard to guess because the term ‘financial system’ already implies this. You can’t attach the wings of a Boeing to an Airbus and expect the thing to fly. The financial system is a complex system with numerous relationships, many of which existing reform proposals overlook. For instance, if you end the central bank, the economy will crash immediately, even if it is flying smoothly. And that isn’t even hard to find out.
The payment system is a key public interest, so governments and central banks stand behind it. Most banks are private corporations driven by profit. They take risks that might bring down the economy. And so, governments and central banks make regulations and oversee the banks. And banks create money, from which they profit, and we all pay for it via inflation. That is not good, but replacing the system with something worse is worse, like the word ‘worse’ implies.
There is no lack of ill-conceived proposals. And most fail to address the primary underlying cause of the dysfunction of the financial system, which is charging interest on money and debts, commonly known as usury. An inflation-free, stable financial system is possible. It may not even need central banks. But a sound reform proposal sees the financial system as a complex system with intricate relationships that interact with one another.
And so, Natural Money comes with a systems approach that aims to uncover the relevant relationships in the financial system and the consequences of changing them. It means that Natural Money is a comprehensive design. The gravest error you can make is to pick only the elements you like. That design will never fly. Nor would an Airbus take off with Boeing wings. So, you either buy Airbus or Boeing. In the case of Natural Money, that is not an option. There is no alternative.
Latest revision: 1 November 2025
Featured image: Wörgl bank notes with stamps
1. The Future Of Money. Bernard Lietaer (2002). Cornerstone / Cornerstone Ras. 2. The Natural Economic Order. Silvio Gesell (1918). 3. A Free Money Miracle? Jonathan Goodwin (2013). Mises.org.
In the past, ordinary people regarded merchants and bankers with suspicion. In popular culture, trade and banking were the domains of people of questionable ethics. Merchants are as slippery as eels, so it is hard to pin down the issue, but everywhere you see the death and destruction they cause. Hermes, the Greek god of trade, was also the god of thieves. Jesus Christ chased the money changers from the Jewish temple. In The Parable of the Talents, however, Jesus said that you must put your qualities to work. Talents were money, so it could mean putting your money to work. And Jesus said that it is easier for a camel to go through the eye of a needle than for a rich man to enter the kingdom of God.
Jesus lived 2,000 years ago. Economics as we know it now didn’t exist, so we can’t blame him for lacking a consistent view on economics. Someone claiming to be Paul added that the love of money is the root of all sorts of evil. The Jewish sage Jesus Sirach noted, ‘A merchant can hardly avoid doing wrong. Every salesman is guilty of sin.’ The Jews and Protestants excluded him from their canons, but his musings are in the Catholic Bible. Greed, or the pursuit of profit, drives trade. Traditional moral systems considered it wrong. We have gone a long way since then. Today, we hold a different view and see trade as mutually beneficial, so those who engage in trade do so voluntarily because they all benefit. Eels are very slippery indeed. And so are merchants.
Today, trade and finance are at the core of our economic and moral system. And so, Friedrich Hayek could write, ‘The disdain for profit is due to ignorance and to an attitude that we may, if we wish, admire in the ascetic who has chosen to be content with a small share of the riches of this world, but which, when actualised in the form of restrictions on others, is selfish to the extent that it imposes asceticism, and indeed deprivations of all sorts, on others.’ Our ethic is that we can do as we please, as if consequences don’t exist. And the ascetic is selfish when he says everyone should live like him. It is moral depravity at its finest. And so, what was good has become evil, and what was evil has become good.
The problem is not self-interest as such, but greed or the ethic of the merchant, and that the difference isn’t clear. Many merchants are people like you and me without evil intent. Shop owners make a living like everyone else and provide their customers with a service. They are often people who care, not the greedy, evil kind that run Wall Street or sell weapons to warring factions in Africa. But something is profoundly wrong with trade. Even a shop owner doesn’t produce something. They provide a service by trading in markets. And individual merchants may have ethical values, but markets never have them. Everything is for sale. Suppressing trade promotes illicit markets and crime. And so, we accept the drawbacks, thinking the alternatives are worse. That is a fatal mistake.
A pragmatic approach says that outcomes matter more than intent, so if the result of nefarious intent, like greed, is good, it is good. And if the outcome of good intent is terrible, it is wrong or perhaps even evil. If factory owners destroy artisans’ businesses and pay their employees low wages, but overall opulence increases as cloth becomes cheaper, then it is good. Likewise, if a country switches to socialism out of good intentions, but the population starves, it is evil. Before the Industrial Revolution, nearly everyone was as miserable as today’s poorest. Capitalism has lifted billions out of poverty. So why bother?
Trade and finance became the engine of growth, bringing industrialisation, modernisation, colonisation, the slave trade, mass migration, the loss of livelihoods for craftspeople, and the depopulation of the countryside. Various movements, such as socialists, anti-globalists, religious groups, small-is-beautiful, and environmentalists, attempted to provide alternatives to the current order with their visions of Paradise, but they all failed. The system is amoral, a brute force driven by our sentiments and urges. As consumers, we crave the best service at the lowest price, and as investors, we desire corporations to increase their profits. And we don’t think about the consequences.
Usury: the destroyer of civilisations
Money is to the economy what blood is to the body. It must flow. Otherwise, the economy will die. If we stop buying stuff, businesses go bankrupt, we become unemployed, the government receives no taxes, and everything comes to a standstill. That never happens because we spend money on necessities like fast food, smartphones, and sneakers. When we buy less, the economy slows, and we enter a recession, or if it gets worse, a depression. Businesses disappear, and people become unemployed and depressed. Usually, the economy recovers, but it may take time, sometimes decades. It is why we must keep buying stuff, and even more, to make the economy grow.
In the past, when borrowers couldn’t repay their debts, they became the moneylenders’ serfs. It is why several ancient civilisations had regular debt cancellations and why religions like Christianity and Islam forbade interest on money or debts. Usury is paying for the use of money, which is a profoundly evil practice. The evil of it lies in the money flows. We all need a medium of exchange. A simple explanation helps to clarify the issue. Imagine the Duckburg economy running on 100 gold coins. With these 100 gold coins, everyone has enough money, and the Duckburg economy operates smoothly. Scrooge McDuck owns ten, but he is a miser and doesn’t use them to buy items from others.
The economic flows of Duckburg now suffer a 10-coin shortfall. Products then remain unsold, and several ducks lose their jobs. To prevent that, Scrooge McDuck can lend these coins for one year at 10% interest to ducks who come short, so the money keeps flowing. At the end of the year, the economy is 11 short. Scrooge McDuck then lends 11 coins at 10%. In this way, he will own all the coins after 25 years. Scrooge McDuck can implode the Duckburg economy by keeping the money in his vault. When the citizens of Duckburg become desperate, Scrooge McDuck can buy their homes, let them pay rent, and become even richer. If you think that is smart, you have the ethics of a merchant. It demonstrates why, in traditional popular culture, merchants and bankers were evil.
Two things have changed since then. Starting with the Industrial Revolution, economic growth picked up, which helped to pay for the interest charges. The nature of money has also changed. It isn’t gold anymore. Nowadays, banks create money from thin air, so the nature of usury has also changed. When you go to a bank and take out a loan, such as a car loan, you get a deposit and a debt that the bank creates on the spot by creating two bookkeeping entries. The deposit becomes someone else’s money once you purchase the car. When you repay the loan, that bank deposit and the debt disappear. You must repay the loan with interest. If the interest rate is 5% and you have borrowed € 100 for a year, you must return € 105.
Nearly all the money we use is deposits created from loans that borrowers must return with interest. Banks might pay interest on deposits. The depositors of a bank act like Scrooge McDuck. They have more money than they need and keep it in the account at interest. If they have borrowed € 1,000,000 at 5% interest, they must return € 1,050,000 after a year. Where does the extra € 50,000 come from? Here are the options:
borrowers borrow more;
depositors spend some of their balance;
borrowers don’t pay back their loans;
the government borrows more or
the central bank prints the money.
Problems arise when borrowers don’t borrow and depositors don’t spend their money. In that case, borrowers are € 50,000 short, and some can’t repay their loans. If many borrowers can’t, you have a financial crisis. Borrowers can reduce their spending to pay off their debts, leading to a slowdown of the economy. The economy is also unstable due to investor expectations. They expect more in the future. If debts remain unpaid or people stop spending, they incur losses and may lose trust and stop investing.
If they lose trust, they stop investing, less money flows into the economy, businesses go bankrupt, people become unemployed, and more borrowers get into trouble. As a result, even less money flows, causing banks to go bankrupt. Economists call it deflationary collapse. That happened in the 1930s, causing the severest economic depression in modern history. There was no money in the economy because lenders feared losing it. To prevent that from happening, governments run deficits and central banks print currency whenever there are shortages in the money flows. With interest on debts, these things are hard to avoid. But if the system never collapses, debts and interest payments only grow.
The 2008 financial crisis could have been much worse than the 1930s, potentially leading to the collapse of civilisation as we know it. That was due not only to the accumulation of far more debts but also because most people now live in cities, where they have become dependent on markets and governments. In the 1930s, most people still lived in the countryside. Central banks prevented a collapse by printing trillions of US dollars, euros, and other currencies. The shortfall was that enormous. We now buy our necessities in shops and rely on the government to keep the system running. We have not only become the usurers’ hostages, but also the hostages of markets and governments.
Barataria: an economic fairy tale
Money equals power, and the lure of riches corrupts us, so the alternatives to the system of trade and usury have failed. They can’t compete. A few people step out, but it is like a rehab from a consumption addiction. It is a sober life while everyone around you keeps on living the good life. After us, the deluge is the prevailing mood. The deluge is already taking off. Storms feed on the warming sea water and leave their burden on our shores. But what are our options anyway? In the early 1990s, the Strohalm Foundation published The Miracle Island Barataria, an economic parable by the Argentinian-German economist Silvio Gesell.1 I rewrote the narrative somewhat to better highlight its message. Gesell explores three options: (1) communism or socialism, (2) a market economy without traders and bankers, and (3) a fully capitalist economy.
In 1612, a few hundred Spanish families landed on Barataria, an island in the Atlantic, after their ships had sunk. The Spanish government believed they had drowned, so no one searched for them, and they became an isolated community. They worked together to build houses, shared their harvests, and had meetings in which they decided about the affairs that concerned everyone. It was democracy and communism. After ten years, the teacher, Diego Martinez, called everyone into a meeting. He noted that working together and sharing had helped them build their community, but the islanders had become lazy. They came late to work, took long breaks, and left early. They spent their time at meetings discussing what to do, but much work remained undone.
‘If someone has a good idea, he must propose it in a meeting to people who don’t understand it. We discuss it but usually we don’t agree or we don’t do what we agree upon. And so, nothing gets done and we remain poor. We could do better if we have the right to the fruits of our labour and take responsibility for our actions,’ Martinez said, ‘The strawberry beds suffered damage because no one had covered them against night frost.’ He mentioned several other examples. Martinez said, ‘If the strawberries are yours, you protect them. And if you have a promising plan you think is worthwhile and you can keep the earnings, you do it yourself and hire people to help you.’
He proposed splitting the land into parcels and renting them to the highest bidder to finance public expenses. Fertile lands would fetch a higher price than barren ones, giving everyone an equal opportunity to make a living. He also proposed introducing ownership so the islanders would feel responsible for their property. But with property, you need a medium of exchange or money. The islanders decided to use potatoes as money. Everyone needed potatoes. They had value, so they were good money.
Potatoes are bulky, thus difficult to carry, and they also rot. At the next meeting, Santiago Barabino proposed setting up a storehouse for potatoes and issuing paper money, which could be exchanged for potatoes when needed. So, you had banknotes of 1, 2, 5 and 10 pounds of potatoes. The Baratarians agreed. The notes had a date of issue and gradually lost their value to cover the storage cost and rot. If you returned the banknote to the potato storage after a year, you received 10% less. And because the issue date was on the banknote, buyers and sellers knew its value.
For several years, Barataria had banknotes representing stored potatoes. Their value declined over time to pay for the storage and the rot. Borrowers didn’t pay interest. If you had savings, you would lend them to trustworthy villagers if they agreed to return notes representing the same weight. The notes lost value, making everyone spend their money quickly and store items and food in their storehouses. The general level of opulence rose, but there were no poor or rich people. There were no merchants buying things at a low price to sell them at a high price. Businesses didn’t pay interest, and there were no merchants, so things were cheap in Barataria. The chronicle notes that the islanders acted as good Christians and helped each other.
Then Carlos Marquez had a new idea. He addressed Baratarians, ‘How many losses do housewives suffer from keeping food in their storehouses? We shouldn’t put our savings in perishable products, but money with stable value. We can back our money with something we don’t need and doesn’t deteriorate. The Pinus Moneta is a nut we can’t eat, and doesn’t rot,’ he said, ‘We don’t have to back money with a commodity of value like potatoes. The things we buy and sell give the money its value. If we do that, we can buy things when we need them and don’t have to store them ourselves.’
What a great convenience that would be. It seemed too good to be true. Diego Martinez argued against the proposal. He told his fellow islanders that a medium of exchange passes hands. It remains in circulation. But savings stay where they are unless those who are short of money borrow them and pay interest. You end up paying interest to use the currency you need to buy the things you need. His argument was to no avail. And that is the price of democracy. People often decide about questions they don’t understand.
Most islanders preferred to spend their time getting drunk in the pub instead of studying the issues of government. And if you are doing well, you can’t imagine that seemingly insignificant errors can ruin you. Marquez spoke passionately, while Martinez warned cautiously, saying things were fine as they were and he couldn’t foresee the consequences. That swayed opinions. The islanders switched to money backed by the Pinus Moneta. This money didn’t lose its value. That made it attractive to save money.
Suddenly, everyone tried to exchange their supplies for the Pinus Moneta, causing mayhem in the marketplace. Everyone brought everything they had to the market. But no one could sell their goods because everyone wanted money. That was until the company Barabino & Co came up with a plan. Barabino & Co. set up a bank with accounts that Baratarians could use for saving and making payments. Everyone could bring their money to the bank and receive an extra 10% after a year. The naive Baratarians agreed. They could have known there weren’t enough nuts of the Pinus Moneta to pay the interest. And they didn’t ask themselves how Barabino & Co. would generate the profits to pay that interest. With this borrowed money, Barabino & Co. bought goods from the islanders and deposited money into their accounts, but Barabino & Co. only purchased food and seeds.
The following spring, Barabino & Co. hiked food and seed prices. Most islanders paid more for food and seeds than they received in interest. They went into debt with Barabino & Co. With the profit, Barabino & Co. bought the next harvest and cranked up food prices even further. Soon, Barabino & Co. owned everything. Most were in debt and worked hard, but a few wealthy people lived off interest income. They didn’t work and lived a life of luxury on the interest on their accounts. The Baratarians needed money to pay for the items they bought from Barabino & Co. They had to borrow this money from Barabino & Co. and pay interest to use it. There weren’t enough nuts to pay back all loans with interest, so the islanders went further into debt year after year. They paid interest on money the bank created out of thin air, giving it to the wealthy. That is usury.
The Baratarians worked harder and grew more creative in earning money. The islanders invented, produced and sold more products, most notably wooden items made from the trees on the island. Not everyone could keep up, and more people lived in the fields. At least, the economy grew, and the Baratarians grew accustomed to luxuries they hadn’t had before. They had wooden chairs, boxes, ornaments, toys, outhouses, carts and tables. The islanders had managed without these items before, but now, they believed they needed them.
The change came with other unfavourable consequences. The Baratarians became agitated, deceitful, and immoral. Crime rose as everyone desired the luxuries that the rich enjoyed, and for which they didn’t have to work. Of their Christian faith, not much remained except an empty shell. They were busy making money. Then came the day the Baratarians had cut down all the trees on the island. They suddenly lacked the wood needed to make the tools for harvesting their crops, and they starved. That was the day the Pinus Moneta lost its value. After all, you can’t eat money.
Adam Smith and the Wealth of Nations
The tale tells how devious acts contributed to an outcome most of us now deem desirable. By selling our souls to the money god, most of us have a better life than people in the Middle Ages. That improvement came with wars, colonialism, the slave trade, pollution, and miserable working conditions, and ultimately, it could bring the end of human civilisation. With the help of saving and investing, capitalists build their capital. Capitalism is about making sacrifices in the present by saving to have a better future via investing. It also led to a mindless process called competition via innovation and economies of scale. Economists call it creative destruction.
In the original tale, the wood didn’t run out, but the British rediscovered the island to find a class society much like theirs. The story tells how devious acts contributed to an outcome most of us now deem desirable. By subjecting ourselves to this system of trade and usury, most of us live a more agreeable life than people in the Middle Ages. It came with wars, colonialism, the slave trade, pollution, miserable working conditions, the destruction of communities and societies, and, eventually, the end of human civilisation. With the help of saving and investing, capitalists build their capital. Capitalism involves making sacrifices in the present by saving to have more in the future via investing. You can always do better. It promoted competition via innovation and economies of scale. But there is no ultimate goal, a vision of Paradise, only creative destruction without end.
The Baratarians were in debt, worked hard and were creative. Those who couldn’t keep up became homeless. As there was never enough money to pay back the principal with interest, the Baratarians went deeper into debt, worked even harder and became more creative by inventing and selling new products, producing an economic boom that ended in starvation once the trees were gone. It looks like the problem we face. The Earth’s resources are finite, and interest accumulates to infinity. Our money becomes worthless once there is nothing left to buy or sell.
Adam Smith, the founder of modern capitalist thought, claimed that pursuing our private interests promotes the public good. A baker doesn’t bake bread to serve the community but to make a living. It is why we have something to eat. The baker doesn’t want to lose customers, so he bakes what they desire. Otherwise, they go to his competitor. Smith believed it would work out well as humans are moral creatures. We temper our behaviour as it affects others. Therefore, moral relativists could argue that we don’t need public interest. The private interest will do just fine. But it is not how markets operate. We may have ethical values, but markets never have them. The least scrupulous usually wins the competition, so the greater evil usually wins in the markets. We have found that out and now want governments to oversee the markets.
Factory owners didn’t consider the plight of the artisans they put out of business or the miserable working conditions of their workers. They would have gone out of business if they had done so. Moral considerations don’t drive business decisions, so psychopaths end up in high places in corporate management.2 These psychopaths in business provide us with harmful products like cigarettes, prostitution, gambling casinos, and semi-automatic rifles. They expand their market by advertising their wares. A merchant will say, ‘If I don’t supply the market, someone else will, so why not profit from death and destruction myself?’ The merchant then claims liberty is the highest value, and restricting markets equals oppression, thus the ultimate evil. Why not let everyone buy cocaine and semi-automatic rifles? It increases GDP. These are the morals of the merchant we now live by.
Without self-interest and trade, we would be poorer, and poverty was Smith’s primary concern. Increasing production was the way out. Self-interest and trade were the tools to achieve that. It succeeded marvellously. Since the Industrial Revolution, production increases have lifted billions of people out of poverty. Adam Smith argued:
The division of labour drives production increases. If you specialise in a trade, you can do a better job or produce more at a lower cost.
A market’s size limits the division of labour. Transport costs limit market sizes. Energy cost drives the volume and distance of trade.
Merchants preferred precious metals as money. It enabled them to store their gains, allowing them to wait for opportunities to make financial profits.
Producers produce items at different times, in different locations, and in different quantities than consumers need. That is why we trade. Traders bridge those gaps by storing, transporting, and dividing goods. Trade promotes large-scale production and labour efficiency, so fewer people provide for our necessities. That allows for more fanciful products and services and industries, thus a higher standard of living.
The evil empire of trade and usury
Economic and financial power translates into military power. The Europeans didn’t finance their conquests with taxes but with the profits from their colonial enterprises. No one likes to pay taxes, but everyone loves a profit. The scheme thus became an unprecedented success. Venture capitalists paid for the first ships, hoping to find new trade routes and riches. And they found them. The Europeans reinvested their profits, so their capital grew, and their financial and military strength increased.
After the bourgeoisie had taken control of the British government during the Glorious Revolution, the British state became a venture of the propertied class, like the Dutch Republic already was. The Dutch Republic, run by merchants, was the most successful and wealthiest nation at the time. The British imported knowledge of Dutch governance by appointing a Dutch governor as their king. In the following centuries, Great Britain became the world’s largest empire.
The British bourgeoisie benefited from a functioning state and was willing to pay for it. The storyline is that taxation became legitimate as it had the consent of the taxed. The British bourgeoisie didn’t like to pay for corruption or ineptitude, so the state’s performance improved.3 With its secured and enlarged tax base, the clamp down on corruption and ineptitude, the invention of modern banking, including a central bank, trust in British financial markets improved, and Great Britain could borrow more at lower interest rates.
It helped Great Britain to defeat France, a country with twice as much wealth and twice as large a population. In France, the wealthy didn’t pay taxes, and the government was always short of funding. France defaulted on its debts several times. The French government was inept and corrupt, which made lenders unwilling to lend to it. The British economic successes, thus having a large market, low interest rates, and high wages, helped to ignite the Industrial Revolution.
During the Napoleonic age, several European countries modernised their governments into modern bureaucracies, with career paths based on qualifications and merit. The British later also modernised their administration, aligning it more with the rational principles of government that other European countries had adopted after the French Revolution.4 The benefits of the division of labour imply it is better to let bureaucrats run bureaucracies and businesspeople run businesses. You don’t let government bureaucrats run a business, nor do you allow your businesspeople to run the government.
The United States followed a different path. When the Founding Fathers set up their new state based on the modern principles of their time, they were ahead of Europe. They introduced regular elections for the president and parliament and a separation of powers between the administration, parliament and the judiciary, thus creating checks and balances to prevent dictatorship or mob rule. The US also became the first democracy. All free men had received the right to vote by 1820.4 Several European countries later followed suit.
The US administration, however, didn’t become a modern professional bureaucracy at first, and the US government remained plagued by corruption, cronyism, and the presence of unqualified individuals. Politicians gave their supporters government offices when they won the election.4 In 1881, a disgruntled man who had campaigned for US President Garfield and sought a diplomatic job as compensation shot the president. Appointing people for political reasons had become unthinkable in most of Western Europe. Modernisation efforts in the US began in the 1880s, took decades, and never fully succeeded. Political appointments are now making a comeback.
The founding fathers had set up the United States as an oligarchic republic run by the propertied classes, similar to Great Britain and the Dutch Republic. Rather than leaning on a clean government like the British elites, the American elites learned to employ corruption, for instance, via campaign financing, bribing judges, and funding think tanks that advise the US government. After World War II, the United States emerged as a superpower, and the gold-backed US dollar became the currency used in international trade. To finance its military, the US began to run deficits in the 1960s and ended the exchangeability of the US dollar for gold in 1971. The US dollar then became the de facto reserve currency, most notably because oil-exporting countries continued to accept the US dollar.
The US dollar’s reserve status allowed the US elites to employ the productive capacity of the rest of the world for their empire. Foreign countries delivered goods and labour in exchange for US dollars, which the United States printed out of thin air. The US financial elites in institutions like the World Bank and the IMF pushed developing countries into US dollar debts, which made them depend on exports to serve the US empire. As a result, the domestic economy of the United States began to suffer from the Dutch disease. The Dutch natural gas exports created a demand for the guilder, which drove up the Dutch currency and made Dutch industries uncompetitive in the 1970s.
The Dutch remedied the issue in the 1980s by making a collective national agreement between the government, employers, and unions to keep wage increases below those of its competitors for several years. Demand for the US dollar, however, increased, not because of exports, but because of foreign nations being dependent on it, pushing up its value and eroding the competitiveness of American manufacturing. And the US didn’t need to correct that issue, because of the US dollar’s reserve status. The US dollar has become an international store of value, and so has US government debt. There was even pressure to go into debt, to satisfy the global demand for US dollars. As a result, deficits have escalated further, and the American economy depends on controlling the world’s financial markets. The American empire is now the Evil Empire of Trade and Usury, the Babylon of our time. However, the end of an empire doesn’t always turn things for the better.
Latest revision: 7 August 2025
Featured image: cover of The Miracle Island Barataria
1. Het wondereiland Barataria. Silvio Gesell (1922). 2. 1 in 5 business leaders may have psychopathic tendencies—here’s why, according to a psychology professor. Tomas Chamorro-Premuzic (2019). CNBC. 3. The Origins of Political Order: From Prehuman Times to the French Revolution. Francis Fukuyama (2011). 4. Political Order And Political Decay. Francis Fukuyama (2015).
A few centuries ago, over 99% of the world’s population lived in abject poverty. In 1651, Thomas Hobbes depicted human life as poor, nasty, brutish, and short. It had always been that way. Yet, a few centuries later, a miracle had occurred. Nowadays, more people suffer from obesity than from hunger. The life expectancy in the poorest countries exceeds that of the Netherlands in 1750, the wealthiest nation in the world at the dawn of the Industrial Revolution. This miracle is the result of science, innovations and a massive build-up of capital. How could that happen? That is because interest rates have come down from 30% in the Middle Ages to near zero today. Only, what caused interest rates to go that low?
In the economic sphere, it is the outcome of an epic battle between ‘Time Preference’ and ‘Capitalist Spirit’ that raged for centuries. The capitalist spirit won. Ordinary people suffer from a condition known as time preference, which causes them to spend their money on frivolous items. They think, ‘Live today, because you can be dead tomorrow.’ Economists say they lack trust in the future. There are also capitalists, who are special people who suffer from an illness called the capitalist spirit. Rather than spending their money on frivolous items, they think, ‘Don’t live today, but invest, so you will have more money when you die.’ Economists say that they have trust in the future.
And so, capitalists save and invest while ordinary people work for them and buy the products and services their ventures produce. When time preference prevails, there are few savings and high interest rates. People are poor because there is a lack of money for investments. When the capitalist spirit prevails, there are ample savings, low interest rates, and wealthy individuals with excess capital to invest. This miracle wouldn’t have happened without low interest rates, as investment returns must be higher than the interest rate, and interest rates can’t be low without efficient financial markets and trust in political and economic institutions. So, how did that come about?
In the Middle Ages, Europeans gradually developed a capitalist spirit. The ethic of the merchant gradually spread, so that money and profit, rather than Christian values, came to drive Europeans. They found new trade routes and exploited their colonies. Initially, Spain and Portugal led the way, but their kings were short of cash and heavily taxed their people. Many merchants moved to the Dutch Republic, which was more business-friendly because the propertied classes ran it. The Dutch didn’t have a strong state with an army, so taxes were also lower. The Dutch invented the stock market, featuring publicly traded shares, a crucial financial innovation that helps manage risk. Since then, investors could invest in a corporation at any time and sell their investment at any time.
Later, Great Britain became the dominant power. The British business elite, who paid most of the taxes, didn’t like paying for incompetence and corruption. After they had gained control over the British state in the Glorious Revolution of 1689, they forced the state to improve its competence. The British invented fractional reserve banking with a central bank, thereby creating efficient financial markets. Their colonial empire also expanded, so that they came to control the largest market, which favoured economies of scale. Once the competent government and financial innovations were in place, the Industrial Revolution took off. Low interest rates made long-term investments in machines profitable.
Once interest rates had decreased, economic growth accelerated, enabling investment returns to cover interest payments, which allowed financial markets to expand and drive further growth. The capitalist miracle is that financial markets helped boost trade and production by creating money that doesn’t exist to start businesses that don’t yet exist to make products that the people those businesses will hire will buy with this newly created money. Financial markets are at the basis of the capitalist economy. When growth slows, interest-bearing debt may collapse the global economy, but so far, financial innovators have invented new schemes to lend more, helped by low interest rates. Low interest rates make an economy possible, not high ones. But trust makes low interest rates possible.
Usury: the hidden cancer
As long as there was growth, there was more for most people, even though the division of the fruits of capitalism has its shortcomings. Personal qualities explain some inequality. Some people work harder, some are better entrepreneurs, some are more frugal, some are more useful, and some are better at exploiting others for their personal gain. These people usually end up wealthier. Still, the primary driving force in the capitalist system has little to do with individual qualities. It is profit or interest. Interest comprises all returns on capital. Interest is the reason why the rich get richer at the expense of the rest of us.
Interest fuels a global competition driven by innovation and economies of scale. As a result, a few oligarchs have become exceptionally wealthy, often by cornering markets, such as in the tech sector. Wealth inequality will be the most urgent immediate challenge once there is less to go around. It is unacceptable that people are starving because of a fuel shortage while the elites fly around in their private jets. Today, the increased use of artificial intelligence drives up energy prices, pushing humans out of the energy market.
Interest rates emerge in a market. Credit in the banking system and the actions of central banks have a profound influence, making financial markets more efficient. Still, supply and demand in financial markets remain key factors. Silvio Gesell had already envisioned, in 1916, that efficient global financial markets would eventually drive interest rates to zero. He based his prediction on the observation that interest rates were the lowest in London, which had the most developed financial markets at the time.
Wealth inequality, caused by decades of neoliberal supply-side economic policies, also plays a role. Gutting labour rights and social benefits to lower taxes for the rich caused their wealth to trickle down via lower interest rates. The wealthy, awash in capital, have run out of sensible investment options because working-class people lack the funds to spend. And so, interest rates decreased, allowing the working class to borrow more, propping up the economy with asset bubbles, in yet another usurious scheme in which the rich exploit the rest of us. Adding mortgage debt has long helped keep several economies afloat, including the Netherlands’.
Most people pay more interest than they receive. We pay interest via rents, taxes, and the price of everything we buy. Interest works like a tax on poverty that the poor pay for the benefit of the wealthy. Lower interest rates could benefit most people by lowering prices. You don’t see that happening. In a usury-based financial system, lower interest rates allow us to borrow more, putting more money into circulation and raising prices. As we borrow more, we may end up paying even more interest. To improve their yields in a low-interest environment, capitalists invent new schemes, such as leveraged buyouts and vampire capitalism. Lower interest rates also enabled more predatory lending because they made loan-sharking profitable at higher default rates.
Lower interest rates have worsened the excesses in the financial system. That is because we live under a usurious financial system. Had the maximum interest rate been zero, loan-sharking and leveraged buyouts wouldn’t be possible. But that would require us to look after people in financial trouble and limit their freedom, rather than giving them the liberty to borrow from payday lenders and credit card corporations. The underlying problem is the merchant’s ethics, which has become the foundation of our moral system, which is no ethics at all. A world without merchants is a world without many comforts we take for granted, but trade also makes us dependent on a system of governments and markets. Interest plays a crucial role. Investments must at least return the prevailing interest rate. Things aren’t straightforward, so ‘interest is evil’ is not a helpful approach to the matter. But what precisely is usury?
What is usury?
When you ask someone what usury is, the answer might be charging an excessively high interest rate. Traditionally, usury referred to paying for the use of money. In other words, usury is charging interest on loans. In this traditional definition, the currency has a constant value, so the borrower must repay the same value. If a ruler debases the currency and halves its gold content, a lender has a legitimate claim on the same amount of gold, hence twice the amount of currency. The reasons why usury is damaging are:
Usury turns money into a tool of power, enabling the rich to exploit the poor.
Usury disrupts the circular flow of money, causing economic hardship.
Fixed interest payments cause financial instability as incomes fluctuate.
Making a profit from a business venture is not usury. However, all capital income is interest, and interest contributes to wealth and income inequality, unless the interest rate is at or below the growth rate. Capitalism has raised living standards, so the prevailing view is that its benefits outweigh its drawbacks. Today, capitalist economies excel in generating money for capitalists by turning energy and resources into waste and pollution to market non-essential products and services in the bullshit economy. Therefore, the drawbacks now surpass the benefits, and by a wide margin.
The economist Piketty found that interest rates on capital were higher than the economic growth rate most of the time.1 That is unsustainable. It requires capital destruction that creates new room for growth or lower interest rates. In the past, World War I, the Great Depression, and World War II annihilated capital and created new room for growth. And so did the end of communism at the end of the 20th century. Eastern Europe, China and India became new centres of growth. The wave of capital seeking a return has finally reached Africa, the last frontier. From now on, growth must come from ‘wealth-creating’ non-essential activities in the bullshit economy, such as data centres that run artificial intelligence.
Value standard
The idea behind banning usury is that it is unfair for borrowers to return more than they borrowed. Traditionally, the poor borrowed from the rich, so charging interest would make them even poorer. If you borrow a loaf of bread, you return it. That is simple. Money, however, is an abstract measure of value, so what is usury and what is not requires a value standard. Islam forbids charging interest on money and debts, but also prohibits the debasement of currencies. According to Islamic law, money is gold or silver. Lenders should receive the same amount of gold or silver as repayment for the loan. There is, however, no reward for the risk of lending, which impedes capital formation. It is one of the reasons why the Industrial Revolution didn’t take off in the Islamic world.
A Natural Money currency serves as the value standard, so usury refers to charging an interest rate above zero on loans. To serve as a standard, the currency must have a stable value. The value of the Egyptian grain money came from its backing by grain stored in granaries. During the gold standard, gold was the value standard, as you could exchange national currencies for a fixed amount of gold. The backing of today’s fiat currencies is the economy. The Quantity Theory of Money states that Money Stock (M) * Velocity (V) = Price (P) * Quantity (Q), so Money Stock (M) depends on Velocity (V), Price (P) and Quantity (Q), and the value of a single unit such as the euro, is M / units in circulation.
A grain or gold backing can give the currency a stable value because there is a limited amount of grain and gold. Such a limit doesn’t exist for fiat currencies. Still, Natural Money currency can serve as a stable value standard because its issuance depends on lenders’ willingness to accept negative interest rates. Lenders thus only lend when they expect the currency’s future value to remain sufficiently stable. When they don’t lend, the amount of money in circulation shrinks due to negative interest rates and debt repayments, allowing the currency’s value to increase and prices to decrease. Trust in the currency thus stems from persistent deflationary pressures, as negative interest rates consume the money supply, and the maximum interest rate constrains credit creation.
Efficiency argument
Today’s global economy is overcapitalised due to massive over-investment in the bullshit economy, so near-term future growth rates will probably be negative, either as the result of an involuntary collapse or a managed decline, and the sustainable interest rate will also be negative. Once the world economy is on a sustainable footing again, there may be sustainable growth, allowing growth rates to become positive once more in the more distant future. A stable economy operating near the maximum growth rate, which can be negative, can achieve its full potential and full employment. That is what the ‘miracle of Wörgl’ suggests.
When average investment returns are near their sustainable maximum, real interest rates are also near their sustainable maximum. The usury-based economy is unstable due to credit expansions and contractions, so it often does not operate at its sustainable maximum, reducing its efficiency. Natural Money helps achieve a stable economy and minimise financial system risk, thereby realising the sustainable maximum. It follows that real interest rates with Natural Money are higher, even when economic growth rates are positive. The maximum nominal interest rate is zero, so higher real rates show up as currency appreciation, allowing an interest rate of zero to yield a positive absolute return.
A simple calculation illustrates this view. Economists assume there is a link between the amount of money and money substitutes (M) in circulation and prices in the equation Money Stock (M) * Velocity (V) = Price (P) * Quantity (Q). If ΔP, ΔM and ΔQ are sufficiently small, and velocity is constant, so that ΔV = 0, then it is possible to approximate this equation with %ΔP = %ΔM – %ΔQ, where %ΔP is the percentage change in price level, %ΔM is the percentage change in money stock, %ΔV is the percentage change in money velocity, and %ΔQ is the percentage change in the quantity of production.
The velocity of money (V) for Natural Money might be higher than for interest-bearing currency, and that could go together with a smaller money stock (M). Still, the velocity is likely to remain constant, as the economic picture is expected to remain stable. Now, it is possible to calculate the real interest rate (r) as the nominal interest rate (i) minus the inflation rate (%ΔP), so that r = i – (%ΔM + %ΔQ).
Suppose the long-term average economic growth rate for interest-bearing money is 2%. For Natural Money, it might be 3% because the economy is more often performing at its maximum potential. Assume that the long-term average money supply increase for interest-bearing money is 6% per year. For Natural Money, it is 0%. The long-term price inflation rate could then be 4% for interest-bearing money. With Natural Money, there could be a price deflation rate of 3% as the economy grows at a rate of 3% with a stable money supply. We can then produce the following calculation:
situation
interest on money
Natural Money
nominal interest rate (i)
+3%
-2%
change in money supply (ΔM)
+6%
0%
economic growth (ΔQ)
+2%
+3%
real interest rate (r = i – ΔM + ΔQ)
-1%
+1%
Economic growth can be higher with Natural Money, allowing real interest rates to be higher. Furthermore, because Natural Money has several stabilisers that reduce financial system risk, the level of risk is likely lower. As a result, the risk-reward ratios associated with Natural Money are better than those in the current usury-based financial system. In other words, the same real interest rate in a usury-free financial system is a better deal because it entails fewer risks. Hence, a usury-free financial system based on Natural Money is more efficient, so there will be a capital flight from the usury-based economy to the usury-free economy after implementing Natural Money on a large enough scale. The efficiency argument demonstrates that usurious finance is parasitic.
The real interest rate may improve more than the economic growth rate due to lower financial-sector profits from phasing out exploitative parasitic activities, such as interest-bearing consumer credit. The rationale is that, without credit card payments, consumers have more disposable income. Furthermore, economic and financial stability can reduce investment risks, thereby requiring less financial sector intermediation. The financial instability and the need for government and central bank interventions in the usury-based financial system create opportunities for politically connected and other savvy and informed individuals, often referred to as ‘parasites’, to enrich themselves at the expense of the general public. The higher efficiency of Natural Money could end that.
The efficiency argument still applies when we switch to a values-driven, people-friendly economy that operates in harmony with nature. The inefficiency of such an economy stems from its inferior ability to generate money for investors by transforming energy and natural resources into waste and pollution in the bullshit economy. That depresses interest rates. That is not an inefficiency in the financial sector. With Natural Money, a values-driven, people-friendly economy can remain operational thanks to the financial system’s efficiency. Terminating the bullshit economy in a usury-based financial system will also depress interest rates. That can bring about an economic collapse, because usury makes capital addicted to growth.
Trust
Someone once asked me on an Internet message board, ‘Why would I lend money interest-free?’ The borrower may not repay. So, why take that risk? We lend interest-free to people we trust, and we may lend to family and friends, even when they are untrustworthy individuals living off our money. After all, they are family and friends. In a market, it won’t happen unless we trust the currency and the borrowers. Hence, ending usury is only possible in a high-trust environment. And investors must be in the market for other reasons than maximising their profits. Those who lend money to organic farms and invest in renewable energy have a different view of investing than vampire capitalists, who scam the government and rob grandparents of their retirement savings.
Credit means trust. Trust in the future is the foundation of the capitalist economy. Investors imagine that the future will be better so that their investments will be profitable or at least not loss-making. Credit, or financial capital, reflects this trust. Most of our money is credit, so its value depends on an imagined future. Some people argue that credit, banking, and central banking are a fraud because they are a fantasy. They may prefer something tangible, such as gold. Indeed, the capitalist economy, as well as civilisation in general, demonstrates the power of human imagination, and our faith in what we believe.
To have trust in the future, investors must believe that their investments are safe. The rule of law, political stability, the absence of graft, and sensible economic policies are fundamental factors for the economy to function effectively. As investments, such as factory investments, are long-term, the risk that a government will annul earlier commitments is a critical factor in investment decisions. Government actions, such as asset confiscation or taxation, can deter investors. Differences in tax regimes are equally damaging, as tax havens parasitise on productive economies that collect taxes to invest in their infrastructure and education.
Interest rates are the lowest in stable countries with low inflation, as trust translates into a risk premium on investments. The greater the perceived risk, the more the future becomes discounted, the higher the interest rates are, and the lower the standard of living usually is. Hence, Switzerland and Sweden have low interest rates, while Argentina and Mozambique have high interest rates. Interest rates in Europe are lower than in the United States. Apart from lower growth expectations, the Stability and Growth Pact, which limits government deficits, plays a role. And the government deficit as a percentage of tax income is a better indicator of the health of government finances than the deficit as a percentage of GDP. These are more sustainable in Europe. And so, trust also plays a role here.
Interest rates in Switzerland are currently at their lowest. In 2025, the key interest rate stands at zero. Interest rates in Switzerland are that low because investors trust the Swiss currency. From 1990 until 2024, the government’s budget deficit averaged at 0.45% of GDP. At the end of 2024, government debt was 20% of GDP. A general rule is that the lower the trust in the currency, the higher the interest rate. Venezuela has the highest interest rate at 60%, but with an inflation rate of 180%, investors are better off with a yield of zero in Swiss francs. In a market, low interest rates signal trust. Hence, trust is a crucial prerequisite for ending usury.
In 2025, interest rates in Turkey exceeded 40% to curb inflation after a failed monetary experiment. The assumption that interest charges cause inflation led Turkey’s leader to force the central bank to lower its interest rates. Inflation soared to 85% in 2022. The Turkish leader was defrauding creditors, thereby transgressing Islamic law. The relationship between interest and inflation exists, but it operates via credit. Credit expansion causes inflation, not interest itself. In a usury-based financial system with fiat currencies, raising interest rates curbs inflation by dampening demand for credit. That obscures the truth that interest is a cause of inflation, but a better way to limit credit expansion is to set a maximum interest rate on loans.
With Natural Money, the central bank doesn’t set the interest rate or manage the money supply. The interest rate and the money supply emerge in the market for lending and borrowing. The holding fee on the currency provides a stimulus by making lending at negative interest rates attractive, so no money remains on the sidelines. At the same time, the maximum interest rate of zero provides austerity, curtailing credit during a boom or when inflation is high. That will cool down the economy and dampen inflation. There could be deflation, and deflation could be permanent. The market for lending and borrowing is free in the sense that the central bank doesn’t manage interest rates and the money supply. However, the maximum interest rate of zero operates as a price control.
Interest rates emerge in the market for lending and borrowing. Negative interest rates require trust in the currency, the government and its policies, the financial system, and, ultimately, in the borrowers. It requires trust in the political economy and the future. In other words, all the world’s governments must be as reliable and capable as Denmark’s, and the global economy must be on a sustainable footing. At the same time, market participants shouldn’t engage in scams. So far, business and ethics haven’t agreed very well. The ethic of the merchant is no ethic at all. The change requires a moral imperative. We shouldn’t harm other people or nature. Instead, we should see the consequences of our actions and change our ways. Only a new religion can make that happen.
The price of usury
Interest promotes wealth and income equality. Most of us pay more in interest than we receive, either directly through loans and rents, or indirectly through the products we purchase. German research from the 1980s showed that the bottom 80% poorest people pay interest to the top 10% of the wealthiest people. You can view interest as a tax on the poor paid to the wealthy. The wealthiest individuals reinvest most of their interest income. That is what made them rich in the first place.
Interest promotes short-term thinking. The pursuit of profit drives the transformation of energy and resources into waste and pollution in the bullshit economy. With positive interest rates, money in the future is worth less than money now. It affects investment choices. Without interest charges, long-term investments would become more attractive. When interest rates are high, cutting down a forest today, selling the wood, and investing the proceeds may give higher financial returns than sustainable forest management.
Incomes fluctuate against fixed interest charges. It can bring borrowers into trouble. Financial instability can lead to economic instability. Usury causes financial crises, recessions and depressions. Governments and central banks manage the problem, but their actions create a false sense of security, allowing debts to continue growing, which will ultimately lead to a financial apocalypse. The underlying cause is usury. However, the road to the end of usury also goes through financial innovation and modern finance.
Fractional reserve banking
Innovations in financial markets have made them more efficient, enabling lower interest rates and increased lending, thereby spurring the Industrial Revolution. A crucial invention was fractional reserve banking. It turned bank deposits into money. There is always a demand for money. It is the most liquid asset. Economists call it the liquidity preference. Money commands power. You can use money to buy anything at any time. We may want to keep cash at hand for expected purchases, unexpected expenses, and investment opportunities.2 And so, we often aren’t willing to lend our money.
Fractional reserve banking enables banks to lend out money that depositors can withdraw. If you lend money to a fractional reserve bank, you can use it at any time, as if it were cash. Banks kept a fraction of deposits in cash reserves to meet withdrawals, knowing that only a small share of depositors would withdraw their money. That freed up funds for investments and helped to lower interest rates. A fractional-reserve bank creates money because a new loan automatically creates a new, equal-sized deposit. And that deposit is like any other deposit. You can use it to make a payment or withdraw cash. Fractional reserve banking eroded the commanding power of money, resulting in lower interest rates.
Fractional-reserve banks can fail when a large number of depositors withdraw their funds at once. The integrity of fractional-reserve money depended on the ability to exchange deposits for cash. That is where central banks come in. They can help banks in times of trouble by printing additional cash and lending it to them at interest. That safety net reduced the risk associated with bank deposits, allowing interest rates to drop even lower, which, in turn, promoted more lending and economic development.
If it sounds too good to be true, then it usually is. Lower interest rates fuelled the economic boom since the Industrial Revolution, which will eventually lead to a technological-ecological apocalypse. Critics of fractional reserve banking and central banking further argue that lower interest rates encourage poor investment decisions and that the safety net provided by central banks creates a moral hazard. If interest rates were to rise, these investments would become unprofitable, leading to bankruptcies and unemployment. And if central banks rescue banks in times of trouble, it will promote irresponsible lending.
There is overcrediting, and lower interest rates promote irresponsible lending by increasing profit margins for usurious lending. The way to end usurious lending is to set a maximum interest rate. More recently, critics have argued that central banks, through extraordinary measures such as quantitative easing, have suppressed interest rates. However, central banks believed that interest rates were too high. They couldn’t lower them due to a price control called the zero lower bound, which distorts the market. By printing money, central banks aimed to generate inflation, thereby allowing them to raise interest rates later.
Reserve requirements
Banks hold reserves, which are money issued by a central bank. Reserves include banknotes and coins, as well as balances that banks hold at the central bank. The primary reason for holding reserves was to meet cash withdrawals from depositors or to make payments to other banks in case depositors transfer money to another bank, and the other bank desires payment in kind rather than an IOU. A reserve requirement is a liquidity requirement. A bank must have enough cash on hand to meet its short-term obligations. Two developments have profoundly affected the need for reserves:
Contrary to the past, depositors hardly ever withdraw their funds in cash, so the money stays within the banking system.
Government debt has become an alternative source of liquidity. Government debt issued in the government’s currency is as safe as cash.
A government can guarantee repayments of debts issued in its own currency by printing more currency, with a so-called independent central bank as a cover, which has become a core foundation of confidence in the current usury-based financial system. The central bank will not let the usury-based financial system fail, so it will print money to buy government debt, which reduces the supply of debt and increases the supply of currency by which to buy government debt, thereby lowering interest rates and allowing the government to borrow more, making new money available to pay interest.
These profound changes have made traditional reserve requirements largely redundant. Banks hardly need any cash in their vaults. If they pay another bank in kind, government debt is as good as central bank currency. Or a bank could borrow at the central bank or another bank and pledge government debt as collateral. The experts concluded that reserve requirements have become superfluous. Government debt has become the actual reserve. And so, banking regulations today focus on solvency, or the ability to meet long-term obligations. Still, it would be a most serious oversight to ignore liquidity.
Globalisation, liberalisation, and derivatives
Advances in information technology and financial innovations have driven the globalisation of financial markets over the past few decades. In the 1980s and 1990s, governments liberalised financial markets and removed capital controls. Capital controls can lead to higher interest rates and higher costs of capital.3 Globalisation and liberalisation expanded the possibilities for borrowing and lending worldwide.4 The increased competition reduced the price of financial intermediation.
Globalisation and liberalisation made financial markets more liquid. It became cheaper and easier to exchange financial instruments, such as bonds and stocks, as well as goods and services, for cash. This development is more commonly known as financialisation. Like fractional reserve banking, financialisation eroded the position of money as the most liquid asset, thereby diminishing the commanding position of money owners to demand interest.
Globalisation and liberalisation also caused trouble. Money and capital could move more freely, making it easier for changing expectations to lead to financial instability. Central bank interventions neutralised a series of financial crises in the 1980s, 1990s and 2000s. Lower interest rates prompted investors to seek higher yields and take on more risk. However, trust and, therefore, liquidity can suddenly evaporate. Some countries used capital controls to counter financial instability while central banks provided liquidity.
Innovations in risk management and derivatives enabled the financial sector to further increase lending. These innovations spread risk, allowing the total amount of risk in the system to grow. Due to a lack of regulatory oversight, derivatives also enabled scammers to sell fraudulent mortgages, contributing to the 2008 financial crisis. Still, banks that professionally used derivatives to hedge their risks weathered the crisis better and had fewer loan write-offs.5
The notional value of outstanding derivatives can be mind-boggling. Their actual value is much lower. You can best compare them with insurance policies. The notional value of your fire insurance policy is typically based on the value of your home. The actual value is the premium you pay. That is, until your house burns down, and the actual value becomes the notional value. Insurers can handle that until many homes catch fire simultaneously.
The actual value of an interest rate derivative on a 3% ten-year bond with a notional value of €1,000,000 might change by €81,109 if the interest rate increases to 4%. As long as parties use derivatives to hedge risks, and counterparties, the ‘insurers’, can absorb the losses, the system will function. An equivalent to all houses catching fire simultaneously could be a sudden increase in interest rates. When the system is more stable, the need for these instruments decreases.
Wealth effect and bubbles
Lower interest rates increase the value of assets via discounting. In theory, the price of an asset is the net present value of its future revenues. Even though that is often not the case in reality, the theory explains why the prices of assets like bonds, real estate, and stocks rise when interest rates decrease. In this sense, lower interest rates can promote wealth inequality, but only when we consider the net present value of assets. If future revenue streams don’t change, wealth inequality is merely a temporary side effect.
There was, however, another dynamic operating underneath. Lower interest rates allow consumers to borrow more by taking out higher mortgages, thereby financing their unsustainable lifestyles. Critics called it a wealth effect promoted by an asset bubble. Lending propped up consumer spending when the incomes of many working-class people were lagging, and the wealth of the rich ‘trickled down’ via lower interest rates as they were running out of sensible investment options, giving them yet another avenue by which to squeeze the working class. In a system of usury, lower interest rates are of no help.
Financial sanity
Interest compounds to infinity. Three grammes of gold at 4% interest turn into an amount of gold weighing twelve million times as much as the Earth after 2020 years. Most of us aren’t long-term planners. We are busy fixing holes rather than solving underlying problems until things fall apart. Economists do this as well. John Maynard Keynes invented government borrowing as a fix for usury-induced debt problems. He once justified his short-term thinking with the world-famous quote, ‘In the long run, we are all dead.’ And this man was the founding father of modern economic policies.
More debt has now become the standard solution for debt problems. Today, most money comes into existence as a loan on which the borrower must pay interest. Every loan creates a deposit. The depositor automatically becomes the lender. If the interest rate is 5%, and €100 is circulating, then €105 must come back. So, where does the extra € 5 come from? Here are, once again, the options:
Depositors (on aggregate) spend some of their balance so borrowers (on aggregate) can pay the interest from existing money.
Some borrowers default and do not return (part of) the balance.
Borrowers (on aggregate) borrow the extra €5.
The government borrows the extra €5.
The central bank creates €5 out of thin air to cope with the shortfall.
Interest payments do not necessarily cause a shortage of money. Still, in reality, they do, mainly because depositors find it, like Scrooge McDuck, difficult, emotionally or otherwise, to part with their money. New debts fill most of the holes caused by the Scrooge McDuckism of depositors. That is why debt levels nearly always increase. Still, the money doesn’t always arrive at the right places, which causes financial crises. A few defaults are acceptable, but too many can cascade into a financial crisis, triggering an economic downturn or even a depression.
The cost of letting the financial system fail is so great that this is not an option. The 2008 financial crisis could have meant the end of civilisation as we know it, had central banks not saved us from a financial apocalypse caused by usury. When no one else is borrowing, the government and the central bank must step in, either by borrowing or printing money outright, to introduce new money into circulation to repay existing debts with interest. In this way, debts continue to grow, and we have become the hostages of the usurers.
The end of the road
The road to the end of usury ran through financial innovations. They lowered interest rates. Today, the world is awash in debt, and interest payments strangle the global economy, so that future interest rates may become negative. That could either be the end of usury or, if usury remains, the end of the economy. The world economy may collapse, or we can have a graceful decline, promoted by the efficiency of a usury-free financial system. The efficiency of Natural Money can help us build a high-trust world economy founded on moral values.
In a simplified world, we rely more on family and community, and less on markets and states, so the economy will also become simpler. Natural Money eliminates risk from the financial system, so that, after its implementation, several modern financial instruments may become obsolete, joining fossil fuels and marketing strategies. Still, economies of scale apply to several essential products and services, including finance. Negative interest rates require risk management that only scale can provide.
Latest revision: 3 December 2025
Featured image: Loan shark picture circulating on the internet, origin unknown.
1. Capital in the Twenty-First Century. Thomas Piketty (2013). Belknap Press. 2. Keynes, John Maynard (1936). General Theory of Employment, Money and Interest. Palgrave Macmillan. 3. Edwards, Sebastian (1999). How Effective are Capital Controls? Anderson Graduate School of Management, University of California. 4. Issing, Otmar (2000). The globalisation of financial markets. European Central Bank. 5. Norden, Lars, Silva Buston, Consuelo, Wolf Wagner (2014). Financial innovation and bank behaviour: Evidence from credit markets. Tilburg University.
For centuries, the Jewish people have lived as a minority in the lands of others. Their relationship with the others has often been problematic. The Jews lived separately in dedicated quarters and were second-rate citizens. And from time to time, they had to flee from murderous mobs. What to do with the Jews? It was a question asked by thinkers and leaders alike. Martin Luther and Karl Marx expressed their views on this matter, called The Jewish Question. Adolf Hitler sought a definitive solution by trying to exterminate the Jews.
As the founder of Zionism, Theodor Herzl, wrote, ‘The Jewish question persists wherever Jews live in appreciable numbers. Wherever it does not exist, it is brought in together with Jewish immigrants. We are naturally drawn into those places where we are not persecuted, and our appearance there gives rise to persecution.’ In folklore, conspiracy theories blamed the Jews for all kinds of things, ranging from spreading diseases, sacrificing children, and conspiring to dominate the world, and this tradition continues into the present. A few examples:
People who oppose interest and usury often blame the Jews as they have been money lenders for centuries, and many are still working in finance.
Jews have taken a piece of Arab land that is now called Israel. They expelled many Arab inhabitants. That is why a lot of Arabs hate Jews.
You sometimes hear that the Jews determine what you hear on the radio and see on television because they control the media.
Perhaps you have read that Jews cause wars and revolutions, often with the help of the secretive Freemasons and the elusive Illuminati.
There is a worldwide trade in illegally harvested organs, and Jews are also involved. But it is not only Jews doing this.
Perhaps you cannot trust Jews because they are more loyal to Israel than the country they live in. And what about people from other nationalities?
The United States has a corrupt and dysfunctional political system. The Jews use it to their advantage. So, follow the money.
The same goes for poor-quality Hollywood movies. The Jews did it.
And Jews can be blamed for other things too, of course not the ‘good Jews’, only the ‘evil Jews’, but it is hard to tell the difference, so do not trust them.
It is a painful history. The truth can only set us free if we let go of hatred. There is a relationship between ethnicity and conduct that goes through culture. Cultures emerge out of history and circumstances. You can’t blame someone for being raised in a particular tradition, but these traditions can harm society. And that isn’t only Jews. Just think of the damage white Europeans have caused all over the globe. Other particular traditions can also be harmful, for instance, ethnicity-related organised crime like the Italian mafia.
Closer inspection reveals that things are not always what they seem. If antisemites allege Jews do this or that, look at the facts and don’t get carried away. If a US politician doesn’t unconditionally support Israel, you know what happens. Money rules our world. But hatred doesn’t solve the issue. Karl Marx wrote:
What is the secular basis of Judaism? Practical need, self-interest. What is the worldly religion of the Jew? Huckstering. What is his worldly god? Money[…] The Jew has emancipated himself in a Jewish manner, not only because he has acquired financial power but also because, through him and also apart from him, money has become a world power, and the practical Jewish spirit has become the practical spirit of the Christian nations. The Jews have emancipated themselves insofar as the Christians have become Jews[…] Money is the jealous god of Israel, in the face of which no other god may exist. Money degrades all the gods of man – and turns them into commodities[…] The bill of exchange is the real god of the Jew. His god is only an illusory bill of exchange[…] The chimerical nationality of the Jew is the nationality of the merchant, of the man of money in general.1
Marx had Jewish roots, so he knew what he was talking about. He equated practical Judaism to huckstering and money and claimed that Christians have become Jews and that humankind, both Christians and Jews, needs to emancipate itself from this practical Judaism. Money rules our world. Money is our God. And that is the core problem we face today. How this situation came to be is a long history.
There has been a long Christian tradition of intolerance towards Jewish people. Only Christians were even more intolerant towards all other religions, including diverging versions of Christianity. Christians only tolerated Jews, first because the Pope said so and later because they proved helpful for trade, tax collecting and moneylending, which were activities Christians found morally reprehensible and didn’t like to do themselves.
Muslims were even more tolerant. Apart from Jews, they also tolerated Christians. And they did not persecute Jews as much as Christians until the Jews founded the state of Israel and expelled the Muslims. That infuriated many Muslims, so they often returned the favour by expelling the Jews. Despite all this tolerance, Christianity and Islam were among the most intolerant religions ever. That proved to be crucial for their success. The owner of this universe, commonly known as God, did not provide sufficient proof of Her existence, so convincing people with reason was not always possible. The Jews did not get that. They preferred to hold on to their exclusive relationship with the all-powerful Creator of this universe. And so, they were not so kind to try to save others from eternal damnation by forcefully converting them.
The plight of Jewish people was not much unlike that of other minorities that did not adapt and integrate into society. The Jews had their religion, and the claims of Christians about Jesus did not make sense to them. Being beaten up regularly is the least you can expect from peasants if you differ from them. And it was often worse than that.
Map of Canaan from around 750 BC
A short primer on Jewish history
Between 1200 BC and 900 BC, a few small nation-states emerged in an area now covered by Israel, Palestine, Jordan, Syria and Lebanon. Among them were Israel and Judah. These small states appeared because Egyptian power in the area was waning. It took a few centuries before new strong powers emerged and overran these small states. Israel fell into the hands of the Assyrians in 720 BC. Judah was destroyed in 587 BC by the Babylonians, who had taken over the Assyrian Empire.
These small kingdoms had a national deity for fortune and protection. Their kings may have adopted this deity to promote a sense of a nation to assert their authority. Yahweh was the national deity of Judah and probably also of Israel. At first, Yahweh’s worship may not have differed much from the worship of other national deities, such as Chemosh, the god of Moab.
After Israel and Judah had ceased to exist, their inhabitants faced an identity crisis. The new powers defeated their uprisings, and the Babylonians took many Jews into exile in Babylonia. Jewish priests then began to write down the Torah (Old Testament) to define a sense of nation around their national deity, Yahweh, without a king or a territory.2 In this way, the Jews became a people without a land. Their promised land, Israel or Zion, remained central to their religion.
Around 450 BC, many exiled Jews were allowed to return. From 164 BC, there was an independent Jewish state for 100 years until the Romans conquered it. At the time of Jesus, tensions were growing between the Jews and their Roman overlords. It led to several uprisings between 66 AD and 136 AD. During these revolts, the Romans destroyed the Jewish temple. Over time, the majority of the inhabitants of the area became Christians and later Muslims. Jews remained in scattered communities around the Mediterranean.
In ancient societies, only the elite received education. The Jews introduced mass education for their people. The Torah became the pillar of their national education system. Divine knowledge, rules, and regulations became open to the public.2 The value of education thus became embedded in Jewish culture.
Nations came and went, but the Jews remained, so becoming people without a land was a successful long-term survival strategy. The Jewish people have been around for more than 2,500 years while not having a homeland for nearly 2,000 years. That was why not all Jews supported the Zionist project of creating the state of Israel. A Jewish state might endanger the Jewish people if they cannot defend their land.
The Jewish religion became the basis for Christianity and Islam. Christianity and Islam both tend to see Judaism as a legitimate religion. Christians and Muslims allowed Jews to live in their lands, albeit as secondary citizens. Living together was not easy. For instance, Christians sometimes blamed the Jews for killing Jesus.3 The Jewish high priests had accused Jesus of blasphemy as he claimed to be the Son of God. According to the Gospel, the Jewish high priests and a Jewish mob demanded the crucifixion of Jesus. And the Gospel, which means good news, by the way, says:
When Pilate saw that he was getting nowhere, but that instead an uproar was starting, he took water and washed his hands in front of the crowd. ‘I am innocent of this man’s blood,’ he said. ‘It is your responsibility!’ All the people answered, ‘His blood is on us and on our children!’
Matthew 27:24-25
The Jews are forever responsible for the death of Jesus, the wording implies, and it became a justification for Christian anti-Semitism.
German picture of 1493 depicting human sacrifice by Jews
In the Middle Ages, rumours spread from time to time that Jews abducted Christian boys for their secret rituals. It is known as the blood libel. So when a boy disappeared, it was time to kill some Jews. There was no basis for these beliefs, but little did people know about the Jewish religion and its practices.2 And because of their ritual hygiene, the Black Death did not hit Jews as much as Christians. Rumours spread the Jews were behind the disease. Medieval peasants often freaked out because they were superstitious and lacked education. And so they burnt witches at the stake when the harvest failed.
In popular culture, Jewish people had a low standing. They worked in trade and finance. These activities were often seen as reprehensible as trade and finance often coincide with questionable ethics. Some languages still reflect this. The English language has the term Jewish stock take, referring to a shopkeeper destroying his shop in a self-lit fire to claim insurance. The Dutch language has the word ‘jodenbod’, which means Jew’s bid, to indicate bids below a reasonable price which people in a desperate position have to accept. Jews living from trade and finance and little love existing between Christians and Jews might lead to that kind of situation.
After the French Revolution of 1789, Jews in Western Europe received citizenship. In Eastern Europe, and most notably in Russia, they faced pogroms or riots that included robbery, destruction of property and sometimes killings. Around 1870, the first Jewish settlers entered Palestine. In 1896, Theodor Herzl published The Jewish State. He claimed that the solution to The Jewish Question was a Jewish state. It marked the beginning of modern Zionism.
In 1873, the Vienna stock market crashed. A lingering recession followed that lasted until 1896. It was the first global economic crisis. Economic growth was lower than previously. Anti-Semitism rose in German-speaking areas and France as people blamed Jewish bankers and industrialists for the situation. It was the time when Silvio Gesell was a businessman. He experienced the poor economic conditions first-hand. It made him investigate the underlying causes and later write the Natural Economic Order.
In 1894, Captain Alfred Dreyfus, the only Jewish member of the French general staff, was convicted of spying for Germany. He was innocent and rehabilitated a decade later after vigorous protests. During World War I, many Jews fought for their nation-states. After the war, a myth emerged in Germany, suggesting Germany lost because of leftists, republicans and a Jewish conspiracy.
A Jewish state
In 1917, the British offered Palestine to the Jews to establish a national home for the Jewish people. The declaration was part of a letter from the United Kingdom’s Foreign Secretary Arthur Balfour to Lord Rothschild, a leader of the British Jewish community. Shortly after the start of World War I, a Zionist Cabinet member, Herbert Samuel, wrote a memorandum proposing to back the Zionist cause to enlist the support of Jews in the war. The Arabs living in Palestine had no say in this, which soon led to tensions and Arab resistance, which the British repressed. Between 1920 and 1940, 300,000 Jews migrated to Palestine, often to escape persecution. The Arabs revolted between 1936 and 1939. The British subsequently restricted Jewish immigration.
After World War II, large numbers of Jews entered Palestine, many of them Holocaust survivors. The Holocaust became a trauma in the collective memory of the Jewish people. Nearly six million of them died in concentration camps and mass executions. It gave credibility to the case of the Zionists, who believed that the Jewish people could only be safe once they had a country of their own. The atrocities the Jews had suffered from raised support for the Zionist cause in the West, most notably in the United States. The Zionists started a guerrilla war against the British. It included 70 terrorist attacks between 1937 and 1948, including the King David Hotel bombing that killed 91 people and the devastating bomb attack on the British police headquarters in Haifa.
In 1947, the United Nations planned to divide Palestine between the Jews and the Arabs. The plan allotted 62% of the land to the Jewish state despite the Palestinian Arab population numbering twice the Jewish population. The Zionist Jews accepted it as it was a favourable deal for them. The Arabs rejected it because, in addition to the Arabs forming a two-thirds majority, they owned a majority of the lands. The Arabs were also unwilling to accept a division and aimed for Arab rule of Palestine.
When Israel declared independence in 1948, a civil war broke out. The neighbouring Arab countries attacked Israel, but the Zionists were prepared and well-trained, and the Arabs lost. Around 700,000 Arab Palestinians, or 80% of the population, fled or were expelled from their homes. The Palestinians call it ‘The Catastrophe’. The Catastrophe greatly influenced Palestinian culture and helped to create a separate Palestinian identity. The Catastrophe means displacement, dispossession, statelessness and fracturing of Palestinian society. It is much like the Jewish diaspora.
During the Six-Day War of 1967, Israel conquered the remaining Palestinian territories. Israel started this war after Egypt blocked Israeli shipping through the Egyptian-controlled Strait of Tiran and brought military forces close to the Israeli border. An Israeli surprise attack caught the Egyptian forces off-guard, causing Egypt to lose nearly all its military aeroplanes. Jordan and Syria came to Egypt’s aid but were also defeated. Whether this pre-emptive war prevented an Egyptian attack on Israel remains a matter of debate. Israel captured and occupied the Golan Heights from Syria, the West Bank from Jordan, the Gaza Strip and the Sinai Peninsula from Egypt.
Around 300,000 Palestinians and 100,000 Syrians fled or became expelled from the West Bank and the Golan Heights. Many others came to live under Israeli occupation. At the same time, Zionist settlers began colonising the remaining parts of Palestine, most notably the West Bank. In 1973, Egypt and Syria launched a surprise attack against Israel with the support of other Arab nations in the Yom Kippur War. After initial Arab successes, Israel repelled the attack. Syrian and Egyptian forces killed and tortured captured Israeli soldiers. Over time, Israel achieved peace with several Arab countries, but the Israeli-Palestinian conflict remains unresolved. Palestinian resistance often comes in the form of terrorist attacks while Jewish settlers keep on colonising Palestinian land.
Conspiracy theories
The anti-Semitic conspiracy theories range from crazy allegations to well-documented research like the investigation into the Israel lobby by John Mearsheimer and Stephen Walt. There is a large grey area in between. And it is a minefield because of the Holocaust. No sensible person would like to see pogroms or worse. The Jewish people are a small nation with an enormous impact on world history. That fuels speculation. Before going into the conspiracy theories, it might be good to come up with a few general explanations for the remarkable successes of the Jewish people. These are:
The Jews invented mass education twenty-five centuries ago (it took twenty-four centuries before Western Europe followed suit) because they felt they all had to understand their scriptures to discuss them intelligently.
Due to restrictions imposed on them in the past, Jewish people often went into occupations like trade and finance, which are activities that can make you rich without a lot of toils.
For centuries, the Jewish people lived under marginal and uncertain conditions which required resourcefulness that may have become part of Jewish culture.
There might be a script running all that happens in this universe, and the Jews may be God’s chosen people, even though that was not always a blessing for the Jews themselves. The parallel with the sacrificial lamb Jesus is eye-catching.
Anti-Semitic conspiracy theories have done tremendous harm and helped to make the Holocaust possible. It may nevertheless be better to view them more objectively as theories for which there might be evidence and the understanding that cultural differences are a source of trouble because the behaviour of one group can harm others. That may require emotional distance as the truth is not always politically correct.
There is a joke that goes like this, ‘Why does Israel not become a state of the United States? Well, if Israel does, it will have only two Senators.’ Israel has the unconditional support of the United States. Senators and members of Congress who hold different views face the powerful Israel Lobby. The lobby will fund the campaign of their opponents, which likely means losing the election. Jewish interest groups have a lot of power, and a book claims there is a secret Jewish plot to gain world domination.
The Protocols of the Elders of Zion is a fiction made up by the Russian secret service around 1900. The Russian tsarist regime was hostile towards Jews. Some people took the protocols seriously, and it subsequently became a guidebook for blaming Jews for everything. The Protocols claim the Jews form a secret cult conspiring to gain world dominance via plots and schemes hidden from the public eye. Adolf Hitler and the automaker Henry Ford believed it, as did many others. And somehow, the work became a bit prophetic. That might be called the irony of history or perhaps the plan of God.
The main themes of the Protocols and related conspiracy theories are Jewish control of world finance, Jewish organisation of radical movements and Jewish manipulations of diplomacy to cause wars that kill white Christians. There are racist, political and religious aspects to these claims. You can definitely read ‘evil Jews’ between the lines. Anti-Semites use so-called whistle words, which means that they mean ‘evil Jews’ even when they do not say so. But using that as an argument can become a way to dismiss legitimate concerns.
Mearsheimer and Walt investigated the power of the Israel Lobby. They claimed that if you criticise Israel in the United States, you will be branded an anti-Semite. It means that you are a racist Jew-hater. Major newspapers subsequently published editorials calling their research anti-Semitic. AIPAC is the most prominent organisation in the Israel Lobby. Mearsheimer and Walt concluded:
AIPAC’s success is due to its ability to reward legislators and congressional candidates who support its agenda, and to punish those who challenge it. AIPAC makes sure that its friends get strong financial support from the myriad pro-Israel PACs. Those seen as hostile to Israel, on the other hand, can be sure that AIPAC will direct campaign contributions to their political opponents. The bottom line is that AIPAC, which is a de facto agent for a foreign government, has a stranglehold on the U.S. Congress. Open debate about U.S. policy towards Israel does not occur there.4
Stranglehold is a whistle word as it might imply that ‘evil Jews’ control US politics, but if you leave out the word ‘evil’, you arrive at a well-documented conclusion. And so, the anti-Semitism argument increasingly fails to convince people. It is apparently forbidden to say the truth in US politics. If you think of the consequences of anti-Semitism in the past or that millions of Jews face displacement or worse if Israel collapses, you might understand why Jewish interest groups go to such great lengths to keep American support.
Suppressing the truth is a self-defeating strategy in the long run while dealing with it is like opening a can of worms. Several powerful lobbies operate in the United States, some representing foreign national interests, but few attract as much attention as the Israel Lobby. So why is the Israel Lobby so powerful, visible and aggressive? There are some possible answers:
Unlike other foreign interests, the Israel Lobby long had broad popular support. Anti-Semitism led to the Holocaust, so the Israel Lobby could more easily claim the moral high ground.
Jews in Israel do not feel secure because of the Holocaust and because Israel is on land taken from the Arabs. Criticism of Israel provokes the fear that the legitimacy of the Jewish state is at stake.
Israel ignores international law by colonising Palestinian land. The unconditional support of the United States helps Israel to do that.
The Israel Lobby is the most visible in the United States but has significant influence in some other countries as well. When a public figure demonstrates a one-sided sympathy for the Palestinian cause, like the former Dutch Prime Minister Dries Van Agt, the lobby brings in anti-Semitism allegations. Former labour leader Jeremy Corbyn faced a similar fate in the United Kingdom. He associated himself with anti-Jewish figures, including Holocaust deniers. His personal views on the matter became of secondary importance. Pro-Israel figures do not face the same kind of scrutiny.
Powerful lobbies undermine democracies, most notably when they suppress dissent, which most interest groups did not do as much as the Israel Lobby. The Woke copied these tactics inspired by the Frankfurt School. In his book Critique of Pure Tolerance, Herbert Marcuse claimed that freedom of speech limits freedom. He proposed a liberating tolerance, which is intolerance to right-wing movements and toleration of left-wing movements. That thought emerged within a context. The Frankfurt School is from Germany and was preoccupied with preventing the reappearance of Nazism.
Usury
The Jew as usurer is a well-known theme in anti-Semitic folklore. The Roman Catholic Church forbade Christians to charge interest to fellow Christians. During the Middle Ages, Jews were excluded from several professions and pushed into activities that Christians deemed reprehensible. One of them was money lending. The Torah allowed Jews to charge interest to Christians. Their principle was, thou shall not lend at interest to your brothers. Christians believed in that same principle. But Christians and Jews did not see each other as brothers. The long-term consequences of interest are not well-understood in modern times as economic growth and price inflation mask them. Interest charges can destroy people, businesses, nations and even entire civilisations.
The financialisation and indebtedness of Western societies, most notably that of the US and the UK, can be traced back to interest charges. The mere pursuit of profit, or making money with money, undermines the moral fabric of society. That may not be obvious as people have different views about right and wrong. There are supposedly nihilist philosophies that are either the outcome of despair or the acknowledgement that we are animals and that our moral values are not absolute but relate to our human nature. But apart from that, the love of money is the root of many kinds of evil.
In the Middle Ages, interest rates were high, sometimes as much as 20% to 30% annually. And so, the misery caused by interest charges was more visible. And Jews often received the blame because they were moneylenders. The official lending by Jewish money lenders mandated by the Church allowed for interest rates below 10%. Persecuting Jews was also profitable for their debtors. For instance, in 1290, King Edward I expelled the Jews from England, confiscated their assets, and defaulted on the loans he had received from them.
In the 16th century, short-term interest rates dropped to around 10% annually because financial markets became more developed and efficient. As interest rates went down, and because of the Protestant Reformation, religious objections against charging interest waned. Once Christians could charge interest on fellow Christians, the Jewish role in money lending was reduced, but it remained significant. Interest became an essential part of the capitalist economy, and Western culture became ignorant about the problematic nature of interest charges. Usury is an insidious process leading to a possible endgame of financial collapse or hyperinflation once economic growth falters.
Jews play a prominent role in the financial sector in the United States. They have served as chairmen of the Fed, including Alan Greenspan, Ben Bernanke and Janet Yellen. The exploitative nature of finance and the bailouts feed the conspiracy theory of Jewish usury. Real wages in the United States have hardly risen for decades, but the US financial sector comprised only 10% of total non-farm business profits in 1947 but grew to 50% by 2010. Finance does not produce food or widgets but merely extracts its profits from those who make real things. At the top of the financial and economic food chain are relatively many Jews. While many ordinary people in the United States struggle to make ends meet, the top 1% is doing well.
Influence on the media and opinion
In 2012, six corporations owned 90% of the mainstream media in the United States. Most of these corporations have Jewish CEOs and owners. Journalists are also often Jewish. How much that affects the reporting remains to be seen. In 2008, Philip Weiss remarked that in a few months, several serious people suggested that Jews predominate in the American media. For instance, at a forum at the Nixon Center, the former high-ranking government official Dov Zackheim said, ‘Jews don’t dominate the policy-making process, but the media is a different story.’ From his personal experience, Weiss claimed most editors were Jewish.6
The real issue is, does it matter? Weiss thinks so when it concerns the Israeli-Palestinian conflict. He cites a few Jewish journalists who admitted to having a bias.5 J.J. Goldberg wrote in The Forward that, although Jews hold many prominent positions in the US media, they do not prioritise Jewish concerns and that Jewish Americans generally perceive the media as anti-Israel.6 And what about the Jews dominating Hollywood? That is such a Jewish stereotype. Joel Stein of the Los Angeles Times mocked the efforts of the Anti-Defamation League (ADL), which is another part of the Israel Lobby, to educate the American public:
I have never been so upset by a poll in my life. Only 22% of Americans now believe “the movie and television industries are pretty much run by Jews,” down from nearly 50% in 1965. The Anti-Defamation League, which released the poll results last month, sees in these numbers a victory against stereotyping. Actually, it just shows how dumb America has gotten. Jews totally run Hollywood.7
The Internet is more difficult to manage. Anti-Semitic and anti-Zionist messages can be found on many message boards. Israel has tried to counter that by paying students to post pro-Israel messages on social media.8 It was part of a public relations effort named ‘hasbara’ that some call propaganda.
In October 2007, about 300 academics issued a statement calling for academic freedom from political pressure, most notably from groups portraying themselves as defenders of Israel. In 2009, sociology professor William Robinson sent an email to students in which he compared the Israeli occupation of Gaza with the Nazi-controlled Warsaw Ghetto during World War II. The ADL started a campaign to discipline him for violating the faculty code of conduct.
Linguistics professor Noam Chomsky, a left-wing political activist, claimed the ADL had compiled a 150-page dossier on him. He is highly critical of US and Israeli policies. Chomsky also defended the right to deny the Holocaust as freedom of speech. The ADL called him a Holocaust denier, describing him as a dupe of overweening intellectual pride who is incapable of distinguishing between totalitarian and democratic societies and between oppressors and victims. Apparently, the ADL collected information to use against him. Chomsky said that an ADL insider sent him the file. It included conversations, correspondence and other materials. Chomsky added that it read like an FBI file. He further noted:
It’s hard to nail this down in a court of law, but it’s clear they essentially have spies in classrooms who take notes and send them to the ADL and other organisations. The groups then compile dossiers they can use to condemn, attack or remove faculty members. They’re like J. Edgar Hoover’s files. It’s kind of gutter stuff.9
In January 1993, the city’s police department raided the San Francisco ADL’s Northern California office. It kept files on more than 600, predominantly leftist, civic organisations and over 10,000 individuals. The police estimated that the ADL had illegally obtained 75% of that information. By November, District Attorney Arlo Smith appeared close to indicting the ADL. Fearing to lose the support of the influential Jewish community for his election, he dropped the case. The police investigation uncovered information about the ADL’s spying operations.10
In recent years, the influence of the Jewish lobby on public opinion in the United States waned because of the simultaneous rise of the woke left and the white supremacist right. The Woke favour the marginalised and oppressed and support the Palestinian cause, while white supremacists are open to anti-Jewish conspiracy theories. The woke people use the tactics that the Jewish lobbies have used previously, for instance, cancelling those with different views. The 2023 Gaza War eroded Israel’s standing further. For Hamas, the coverage of the Israeli brutality in Gaza was a gift that kept on giving. The terrorist attacks were over after a few days, but the misery in Gaza dominated the news for months.
Causing wars and revolutions
The French revolutionaries decided that Catholics, Protestants and Jews became full members of society. In 1797 and 1798, a French Jesuit and a Scottish physicist published two remarkably similar books claiming secret societies were undermining the social order and had started the French Revolution. Both named the Freemasons and the Illuminati as the main culprits. And Jews were also seen as conspirators. They benefited from Napoleon giving them equal rights, so they must have organised it. Much of contemporary conspiracy thinking still centres around these secretive groups and Jews.
And Jews supposedly started the Russian Communist Revolution of 1917. Anti-communists brought up the idea during the ensuing civil war to use existing anti-Semitic sentiments for their political aim. There was a high number of Jewish Communist Party leaders during the revolution. The anti-Semitism in the Russian Empire may have induced them to join radical political movements.
That does not explain why many Jews joined radical movements in other countries. Milton Friedman tried to shed some light on this issue. He found that Jewish people wrote a significant part of the revolutionary anti-capitalist literature and ran and disproportionally filled the ranks of Communist parties in many countries.11 A conspiracy theorist would like you to believe that the Jews seek to control both sides.
Friedman did not think Jews were seeking world domination. He gave two reasons why they joined radical movements. First, the left provided the Jews with equal citizenship, while the Christian right did not. Second, the stereotype that Jews are profiteers and usurers may have persuaded them to show themselves and the anti-Semites that they are not selfish and heartless but public-spirited and idealistic.11 A third reason, which Friedman did not mention, was that many intellectuals were Jewish causing them to have a significant influence on both socialist and capitalist thinking.
Anti-Semitism did not disappear in the Soviet Union. In 1948, Stalin started a campaign against the so-called rootless cosmopolitans, a euphemism for Jewish intellectuals. During that campaign, the Soviets killed leading Jewish writers and artists and removed Jewish scholars from the sciences.
After 1968, the left gradually alienated from its traditional base of workers in favour of disadvantaged groups like ethnic minorities, women, and LGBT people. The Marxist Frankfurt School played a significant role in this development. The Cultural Marxism conspiracy theory claims Marxists of the Frankfurt School undermine Western civilisation with civil rights movements, feminism, multiculturalism, LGBT propaganda, and above all, pop music, causing a breakdown of traditional Christian values. Several prominent thinkers of the Frankfurt School were Jewish, so some see Cultural Marxism as an anti-Semitic conspiracy theory.
The recent American wars in the Middle East are, to a significant extent, the outcome of the neoconservative ideology. They based their thinking on The Clash of Civilisations by Samuel Huntington. Huntington wrote that Western nations will lose predominance if they fail to recognise the irreconcilable nature of cultural tensions. He thus questioned whether multiculturalism would ever work. Huntington considered Islam a fundamental problem for the West.12 Only, Huntington himself believed that the West should adapt to a new era in which it is no longer dominant.
The neoconservatives held a different view. Leo Strauss, the founder of American neoconservatism, proposed a restoration of the vital ideas underpinning Western civilisation, such as classical Greek philosophy and the Judaeo-Christian heritage, and promoted faith in the moral purpose of the West. It is one of the reasons why the neoconservatives pressed for war to bring liberal democracy to Iraq. It was mainly due to the personal efforts of the non-Jewish Vice-President Dick Cheney, who had links to the oil industry, that this war came about. The Iraq War caused at least 300,000 civilian fatalities.
A conspiracy theorist could allege that, apart from undermining Western civilisation, the Jews also spread it by orchestrating wars and revolutions. The Protocols inspire this kind of thinking. If take the Protocols seriously, you might conclude that the Jews of the Frankfurt School and the Jewish neoconservatives secretly coordinate their actions to achieve Jewish world domination. And that the absence of evidence for this claim would be solely due to the secrecy of the operation rather than its non-existence.
Blood Libel 2.0
In 2009, the Swedish newspaper Aftonbladet ran an article about Israeli organ harvesting with the sensationalist headline ‘Our sons are plundered of their organs’. That was bad publicity for Israel. The allegations bore some similarities to the blood libel. Dead Palestinian children had been returned to their families by the Israeli army with organs missing.13 In the 1990s, Israeli doctors had taken skin, corneas, heart valves and bones from deceased Israelis, Palestinians and foreigners without permission.14
Organ trafficking is widespread. China, India, Pakistan, Egypt, Brazil, the Philippines, Moldavia, and Romania are among the world’s leading providers of trafficked organs. And China harvested organs from political prisoners. Trafficked organs are either sold domestically or exported to be transplanted into patients from the US, Europe, the United Arab Emirates, Saudi Arabia and especially Israel.15 Israel faces a shortage of organ donors because Jewish religious law requires the body to be intact in burial.16
Illegal organ trade is a questionable business but it can save lives. For poor people, the choice may come down to selling a child or selling an organ. Not allowing organ sales may make their situation even more miserable. Stealing organs from the dead is reprehensible because the deceased nor the family have given permission. These practices probably existed in Israel on a wider scale even though they likely have ended by now. It is telling that a stolen heart may have been used in Israel’s first successful heart transplant.17
Allegiance
The loyalty of Jews is another theme in conspiracy theories. Every minority in a foreign country faces the question of allegiance. It isn’t a big issue when the minority and the host country don’t have a serious conflict of interest, or when the minority has little influence. Jews have significant clout in the United States and elsewhere. In his book By Way of Deception, Victor Ostrovsky, a former operative for the Israeli intelligence service Mossad, claimed this service recruits helpers among the Jews outside Israel for its operations.18 Other secret services also enlist compatriots for espionage abroad, but the Mossad is legendary for its daring operations on foreign soil.
One of the most well-known helpers was Jonathan Pollard. As a young Navy intelligence analyst, he had claimed that the United States withheld information from its close ally, Israel. He took it upon himself to correct this injustice. He sold classified US documents to Israel. Sensitive documents stolen by Pollard ended up in the hands of the Soviet Union, putting the lives of US intelligence assets at risk. A few other cases of Israeli espionage in the United States attracted publicity, such as the arrests of former AIPAC officials Steve Rosen and Keith Weissman.
A noteworthy incident that raises questions is the Israeli attack on the spy ship USS Liberty during the 1967 Six-Day War, killing 34 Americans and wounding 170 others. The attack consisted of an air attack followed by a sea attack with gunboats. The official story is that Israeli forces mistakenly identified it as an enemy vessel. A story reported by former US Ambassador to Lebanon, Dwight Porter, who recounted a conversation between an Israeli pilot and the Israel Air Force war room picked up by an NSA aircraft and inadvertently cabled to CIA offices around the world, tells a different story:
Israeli pilot to war room: This is an American ship. Do you still want us to attack? War room to Israeli pilot: Yes, follow orders. Israeli pilot to war room: But sir, it’s an American ship – I can see the flag! War room to Israeli pilot: Never mind; hit it.
It was clear to the Israelis that the ship was American. Israeli reconnaissance planes had already identified the ship as an NSA intelligence vessel earlier that day. The exchange between the pilot and the war room raises questions. What reasons could the Israelis have had? And why would they risk angering their ally, the United States? The journalist Peter Hounam claimed that President Johnson, fearing he would lose the election, sought a pretext to let the United States join the war on the Israeli side and had asked the Israelis to stage a false flag attack. That would also have been in Israel’s interest.
The intriguing coincidences surrounding the terrorist attacks of 11 September 2001 have kept conspiracy theorists on edge. One of them is that a New York housewife spotted five Israelis filming the attacks on the World Trade Center from a rooftop just after the first strike had hit the Twin Towers. The Israelis appeared full of joy as the World Trade Center burned and crumbled. The police arrested them with $4700 in cash, foreign passports and a pair of box cutters of the type used by the hijackers. Two of them were Mossad agents. The FBI believed they were spying on Islamic extremist networks.19
The FBI interrogated them for weeks and concluded that there was no evidence they had foreknowledge of the attacks. The Israelis were uncooperative. It was impossible to extract much information from them. Later, some of them discussed the events on an Israeli talk show. One said, ‘We come from a country that experiences terror daily. Our purpose was to document the event.’19 The evidence suggests the Israelis knew more, likely some specifics of the attack plan. An Israeli official told the Associated Press, ‘Everybody knew about a heightened alert and knew that bin Laden was preparing a big attack.’ He said the Israelis had passed on this information to Washington and denied Israel had concrete intelligence that could have prevented the attacks.20
The Mossad is known for its daring operations. In the aftermath of the Hamas terrorist attacks of 7 October 2023, Israel scored some remarkable successes against Hezbollah and Iran with the help of its secret services. Mossad agents had duped Hezbollah into buying thousands of explosive pagers and walkie-talkies. When Israel attacked Iran in 2025, it immediately struck a slew of high-value targets, killing senior commanders and nuclear scientists and disarming Iran’s air defences. Israel’s successes stem from intelligence operations conducted inside Iran. Commando forces operated in Tehran and across the country, while Iran’s security and intelligence agencies remained unaware. Mossad teams targeted air defence missiles, ballistic missiles, and missile launchers. Israel had already assassinated several Iranian nuclear scientists and acquired Iranian nuclear information. These attacks occurred almost immediately after the UN watchdog had declared Iran in breach of its non-proliferation obligations.
Influence on the United States government
An evangelical Christian desire to return the Jews to the Holy Land has promoted the Zionist cause in the United States, as they believe it to be a prerequisite for the Second Coming of Jesus. Consequently, there is strong support for Israel amongst Evangelical Christians and Republicans. Jewish Americans often back Democratic candidates, so Democrats pay close attention to their Jewish voters. It ensures support for Israel in both political parties. US politicians need donations to fund their campaigns. Corporations and wealthy individuals buy influence, which is bribery. Jews generously donate to political campaigns. In 2006, 60% of the Democratic Party’s fundraising and 25% of the Republican Party’s fundraising came from Jewish-funded Political Action Committees.
Several Jewish Americans found their way into influential positions in the United States government. Some were also citizens of Israel. In 1994, the Israeli paper Ma’ariv wrote that the Clinton Administration allowed more Jews in sensitive positions than any government before. The article noted that this was not a design and that their achievements had brought them there. The Jewish component of the Democratic government was significant, but there were also Jews heading for top positions in the Republican Party, for example, Paul Wolfowitz.21
Wolfowitz was one of the neoconservatives, a political movement whose ideology played a significant role in American policies after 11 September 2001. In 2000, he was one of the supporters of the Project for the New American Century (PNAC), which promoted the removal of Saddam Hussein. After 11 September 2001, the PNAC pushed for an attack on Iraq. The security of Israel played a role in the considerations of the neoconservatives, but there is little evidence that protecting Israel was a principal reason for starting the Iraq war.
Mearsheimer and Walt wrote that pro-Israel figures have established a commanding presence at the American Enterprise Institute, the Center for Security Policy, the Foreign Policy Research Institute, the Heritage Foundation, the Hudson Institute, the Institute for Foreign Policy Analysis, and the Jewish Institute for National Security Affairs and that these think tanks are all decidedly pro-Israel.4
In most cases, the US supported the position of Israel, but there are a few instances in which the US government did not. The Eisenhower administration forced Israel to withdraw from the Sinai after the Suez Crisis. The administration of Bush Sr delayed support to Israel because of the settlements in the Palestinian territories. The Israeli government and the Obama administration differed on the settlement issue and how to deal with Iran, and the Israel Lobby organised resistance in Congress and the Senate.
Protocols of the Learned Elders of Zion cover
The irony of history
Perhaps the Protocols of the Elders of Zion are worth reading to see how the most bizarre conspiracy theories can appear convincing if you look at the evidence. If the Protocols had been for real, then the situation in the United States today may not have been so different. There is no grand conspiracy of Jews aiming for world domination, but what difference does that make in practice? It is the irony of history and perhaps God’s peculiar sense of humour. And so Manny Friedman wrote in the Times Of Israel:
We have, for example, AIPAC, which was essentially constructed just to drive agenda in Washington DC. And it succeeds admirably. And we brag about it. Again, it’s just what we do. But the funny part is when any anti-Semite or anti-Israel person starts to spout stuff like, “The Jews control the media!” and “The Jews control Washington!” Suddenly we’re up in arms. We create huge campaigns to take these people down. We do what we can to put them out of work.22
Did Friedman write that Jews determine who is allowed to govern in Washington DC? And perhaps the Israel Lobby has taken advice from the Protocols:
And let’s not forget AIPAC, every anti-Semite’s favourite punching bag. We’re talking an organisation that’s practically the equivalent of the Elders of Zion. I’ll never forget when I was involved in Israeli advocacy in college and being at one of the many AIPAC conventions. A man literally stood in front of us and told us that their whole goal was to only work with top-50 school graduate students because they would eventually be the people making changes in the government.22
Did he write that the Jewish interest groups act as if the Protocols were real? Perhaps the anti-Semites who believe the Protocols are real are not that imaginative. Then Friedman draws the following conclusion:
The truth is, the anti-Semites got it right. We Jews have something planted in each one of us that makes us completely different from every group in the world. We’re talking about a group of people that just got put in death camps, endured pogroms, their whole families decimated. And then they came to America, the one place that ever really let them have as much power as they wanted, and suddenly they’re taking over. Please don’t tell me that any other group in the world has ever done that. Only the Jews. And we’ve done it before. That’s why the Jews were enslaved in Egypt. We were too successful. Go look at the Torah — it’s right there. And we did it in Germany too.22
Did Friedman imply that Adolf Hitler had valid reasons to fear the Jews would take over Germany and that the proof of it is that they did so in the United States? It may be the personal opinion of a Jewish writer, but he made these comments in good spirit and as an expression of pride about his fellow Jews, and he writes what many people think. And you can plausibly interpret the evidence that way. Friedman could say it because he is a Jew, but if you are not, you are an anti-Semite. And you cannot call him a renegade or a self-hating Jew.
Jews excel in many fields, for instance, academics and finance. But pride comes before destruction and an arrogant spirit before a fall (Proverbs 16:18). The Nazis went down with their musings about Germans being a superior race. If the upper class of society coincides more and more with a small ethnic minority, ethnic tensions arise. The situation needs attention. Otherwise, this can end badly. History has taught us that too.
The Jewish people always lived at the margin and had to be resourceful to survive. These skills could have become part of Jewish culture so Jewish people could come out on top once they could operate without restrictions. And that can be at the expense of others and elicit resentment. That is not to say that there should be restrictions applying to Jews that do not apply to others. It is an instance of cultural differences causing trouble in multicultural societies. A fairer and more equitable society can also solve this issue.
Latest revision: 26 January 2024
Featured image: Blame Jews For Everything For Dummies. Found on Reuvera.hubpages.com. [copyright info]
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The Plan For The Future 